Six Simple Steps to Budgeting

One thing we know for certain in this life is that you can say one word to just about any person (over the age of 16) and produce 1 of 3 reactions.  Like side-effects in a pharmaceutical commercial, one of them tends to happen….

  1. In some cases, slight nausea has been reported.
  2. In others, complete apathy- The use of this word causes a “Homer Simpson” reaction whereby you exist within the bounds of what is happening, but really, you are just staring blindly into an abyss.
  3. Rare cases of running in terror have been reported. (In your mind, of course, as you are reading this on a website.)

You have to be curious as to what word in the English language could cause such a reaction. The word is not all that impressive, but its implication is vast. The word is important, but not for the reasons that you think.  The word is….budget.  Yep, we said it.  Budget.  The single most boring word in the world, or scary, or whatever negative adjective you want to throw at it.  It is all of them.  We feel this way because we like instant gratification…we like feeling comfortable…we like not thinking about hard things. Many prefer a root canal over thinking about a budget.

However, we also build budgeting up into this life-altering function that sucks up our time and energy, when it is really a simple task intended to make our future-selves thank our past-selves. So, the question is, how do you make your future-self thank you without draining more time and resources from your present-self? With some pre-work, and thanks to the hundreds of apps on the marketplace today, budgeting is not the scary task that we make it out to be.  Below you will find a couple of simple steps that will help get you started.

Step 1:  Take a look at what you bring home, and what you have to pay.

This is the scary part for many. It can be intimidating to look at how/where we spend our money. However, in order to have a starting point, this has to be done. The key is not to make it harder than it has to be. Start with the income that you have, after taxes, for a one month period. Then gather up ALL of your bills and start calculating. This is designed to be a guide so do not dive too deep here. According to studentaid.gov, you should overestimate your expenses and underestimate your income.

Step 2: Determining needs and wants

The purpose of this is to look ahead. Sure, that beach trip you want to take sounds fun but is it feasible?  If it really is, you can create a monthly saving plan to get you there.  On the other side of that coin, we need our utilities and healthcare maintenance items. Healthcare maintenance items could still require planning, but are definitely a need. This step can also begin to determine if some of your expenses are as important to you as you thought they were. Sure, you wanted to see the final season of “Game of Thrones,” but do you still need the monthly expense of the premium app/channel on your television?

Step 3:  Create your monthly budget

Believe it or not, you are almost done!  You are aware of your income and expenses, you have determined what the must haves are, and what you would like to have. Now put all of that together into a monthly plan that you are comfortable with following.

Step 4:  Get an App to help you keep track

All you need is your cell phone! Some apps are better than others, but they all have the ability to give you some idea of where your money is going. Find common ones in the app store, and seek out the ratings and reviews. Try a couple on your own and see what works for you!

Step 5:  Live it out for a couple of months

Up until now, this is all pencil and paper, and an app…simple ideas. Take a month or two and put those ideas to practice to make sure that what you expected to happen is ACTUALLY happening.  Revisit the budget to see if it is holding up to the expectations. Most importantly, don’t be surprised if it didn’t quite work out as you thought. Adjust it with any changes in income and expenses, re-evaluating needs and wants along the way. Also, look to see if you saved any money through your plan. Did skipping the fancy coffee on Tuesday translate into more money…or did it get spent on something else? These little items can make a big difference!

Step 6:  Now that you have this short-term stuff down, take a crack at a longer term goal.

Once your budget has become a habit, and you are committed to it, you may be surprised to find spare change laying around. This is the moment that you can begin looking at your wants list and create a goal for yourself.  Still regretting not taking the trip to the beach?  How long would you have to save up the extra money you have saved via your budget?  Want to build up a savings account?  Build a long-term plan that makes sense in your budget, and stick to it. Pay yourself like any other bill. Who knows, you may surprise yourself.

If you have made it this far, we hope that you have learned something. Even if it is just that those side effects are a little easier to avoid than you thought!

For more information on building a better future for yourself, check out WVJC’s career-focused programs, by clicking here!