Set Your First Budget

When it comes to your money, setting a budget is probably one of the most important steps to keeping more of your money each and every month.  So, it’s time to sit back and get comfortable with your first budget!

Now, there are tons of different strategies out there for how to budget and how to make the most of your money.  Some of them are more hands-on than others, but the most important thing here is that you do not wait to have a lot of money in order to start budgeting.  If you only have ten dollars a month, then you need to account for every one of those ten dollars.  Where they’re coming from and where they’re going.  Then, what you want to do with them.  But first, let’s do a quick basic definition of a budget.  A budget is simply an estimate of your income (the amount of money you’re bringing in and have available to spend, save, or invest) and your expenses (all the things that you need to spend money on ).  It can be as simple as a piece of paper split into two columns where you jot down all of your paychecks gifts and so on in one column and all of your bills purchases grocery costs and so on in the other.  Or it can be  more complicated than that.  It can also automated through various apps and programs that help sort your budget for you.

Just as there are many different ways to track the nuts and bolts of a budget, there are also many different philosophical approaches to budgeting.  Some people approach budgeting with a straightforward pay yourself first strategy, where they set aside money first thing every month to be saved before sorting out all of the other money into different categories.  Others practice zero based budgeting, where every single dollar is assigned a category, with nothing left over at the end of the month.  These strategies are a bit more involved but they can easily be mastered once you’ve gotten used to the basics of understanding your budget.

If you aren’t sure of where to start with budgeting try keeping a money diary by writing down every purchase that you make for a given period of time.  This will help you start to understand your spending patterns so you can get an idea of how much money you want to dedicate to each category, as well as some of the things that you probably want to cut out  completely.  Regardless of your individual strategy, the most basic thing to keep in mind about a budget is that your expenses should not exceed your income.  You literally want to finish every month in the black, meaning that you have money left over to save or invest.

Now, if you’re spending more than you’re bringing in, that means you’re in the red for the month.  You’ve spent more than you’ve earned and you may still owe that money on a credit card or to someone you might have borrowed it from.   The most traditional budget there is is a simple list of the money coming in compared with a list of the money going out.  You record your income and assign it and your expenses in a category things like housing, utilities, student loans, paychecks, gifts, etc.

There are many ways to budget your income depending on how hands-on or hands off you want to be.  Some people swear by the old-school Google sheets method, of which there are plenty of examples, such as the financial diet.  But others prefer various apps which will help you to automate the categorization and analysis of all of your different spending and income.  Others still prefer to use a literal pen and paper because they find that actually writing these things out and doing the calculations themselves helps keep them accountable and very aware of every single line in their budget.  Again, no matter which method you picked you’ll generally have some basic categories of expenses that you’ll need to track, such as rent, internet or cell service, food, etc.  From there, you can drill it down even further if you’re trying to see exactly where your money goes.  These categories are then assigned an amount per month.  Your spending may vary month to month, but the idea is to never exceed the amount in any given category.  This helps keep you under budget overall.

Another strategy is called the envelope method, where you literally take a stack of envelopes labeled with your expense categories and put the money for each category in the envelope.  Then, whatever money you put in each of those envelopes is the only money you can use for that category that month.  The envelope method is obviously rather labor-intensive, but many people do find it very helpful to totally realign how they think about money and start fresh on a very accountable budget.  (Keep in mind that for big recurring expenses,  such as your rent or utilities, you may not want to keep them in envelopes.  You may want to just simply automate those bills, so the money comes out of your checking account and you don’t have as much cash on hand all the time.

Another popular budgeting method is the 50 30 20 rule.  The bare bones of this method is that 50% of your income should go to necessities, 30% goes to things that you want, and 20% goes to savings or paying off debt.  Some people do prefer to swap those last two so 20% is going to your wants and 30% to savings or debt payoff.  This is a very effective way for many people to budget because it’s a zero-sum budget, meaning that every single dollar is allocated.  It can be a bit inflexible because, for example, you may live in a place where it’s not realistic for your total necessary purchases each month to fall under 50% of your take-home pay.  In New York, for instance, you’d have to be earning quite a lot in order for that to be the case.

Perhaps the most difficult part of budgeting, especially if you’re someone who has a tendency to slip into that treat yourself mentality or confuse things that are nice to have with things that are necessary to have, is understanding the difference between necessary and unnecessary expenses.  The main thing is that you have to be super honest with yourself.  What are the basics that you need to get by each month?  There should be a basic minimum grocery bill, things like your rent or mortgage, basic utilities, internet, cell phone, etc.  Once you have identified in a very honest and clear way what your absolute necessary expenses are, those need to be taken out of your budget first and foremost by subtracting this amount from your monthly income.  This gives you a clear number of what you have left over for everything else and that everything else has to represent both your unnecessary expenses and your savings / debt repayment / investing.  Now, don’t get me wrong, unnecessary expenses doesn’t mean you will never buy or pay for these things.  It simply means that when push comes to shove, they do not absolutely need to be included in your monthly budget.  Things like going out to dinner with your friends, subscriptions and gym memberships, fitness classes, hobbies, coffees, and that kind of stuff can be categorized as unnecessary even if most months you end up paying for them anyway.

Again remember that whatever is left over in your budget after subtracting your absolute necessary expenses are going to be competing for space.  The more of those unnecessary expenses that you’re paying for each month, the less that you’ll have to go to savings, investments, or paying off bills, so make each dollar count.

Of course, the best way to get a really clear picture of what your actual necessary versus unnecessary expenses are is to get really good about tracking your own spending and getting a very clear picture of your lifestyle and what it costs to live it.  This is part of the reason why one of our first tips on this topic was to start with something like a money diary or writing down everything you spend on for a month or so.  Often when we’re setting out a budget for the first time, especially if we really want to cut back or save a lot, we have a tendency to wildly underestimate how much we realistically spend on certain categories each month.  It’s much better to make a realistic budget from which you can slowly start to chip away than to try to radically alter your spending in a way that doesn’t match up with your lifestyle.  If you do that, you’ll inevitably fail at the budget stop trying altogether.  Understanding how much you tend to spend at the grocery store every month, as well as doing a very clear inventory of which of your more regular bills you could probably cut back on versus the ones that need to remain the same, is extremely important for setting a realistic budget.  For example, you may be someone who uses your cell phone all the time for both work and personal use, so for you it’s much more important to just go ahead and pay for that more expensive unlimited monthly plan than to try and radically lower your monthly cell phone bill to a point where you constantly end up having to pay overages each month.

With a very clear record of your spending and analysis of your lifestyle, you will be able to paint a very clear portrait of unnecessary versus necessary and identify the places in which you can start to make meaningful changes without radically altering your lifestyle or setting yourself up for failure.  Remember, you don’t have to have an incredibly strict budget in order to get control over your money!  Sometimes you’re going to spend money on frivolous things or make mistakes or buy something that you might regret, but that’s okay.  What is important is having a very clear understanding of what is coming in and what is going out.

It’s also okay to experiment with different methods of budgeting so that you can get a feel for what works best for you and what’s more sustainable for you in the long run.  The power of a budget is in having control over your money and, at the very least, even if you’re currently spending more than you make, at least you have a very clear mental picture of what’s happening and what needs to happen in order for you to be in the black again.  Remember, no matter how little you may be taking in each month, it is never too early to start budgeting. Waiting until you’re rich to have a budget is like waiting until you’re married to start dating.

Save More by Creating a Monthly Meal Plan

A couple of months ago while attending a board of education meeting; a fellow colleague was astounded that I was able to put a hot meal on the table for my family before rushing out the door. She asked, “How do you get dinner on the table on time? How do you have the time to make everything from scratch? How are you not tired?”

I’d be lying if I said I wasn’t tired. I am a mom of two who works a full time job and runs a business – I am exhausted by the days end. Ever get the feeling while staring in the fridge you have no clue what you will be cooking? It is the dinner planning stress that paralyzes you, you are left just staring into the fridge, focusing on what you have and hoping that something new and exciting pops right out at you.

You don’t have to be a master chef in order to meal plan. Think of meal planning as an organizational tool for planning out your meals. Breakfast, lunch, or dinner – it is a plan that you make way before you even step foot into the grocery store. When I didn’t meal plan, it caused me unwanted stress.

I meal plan for dinner once a month and I don’t even step foot into a grocery store. I don’t have time to go to the grocery store the second I run out of something, it just isn’t logical. So what happens next? You will find yourself buying take out, until you can make it to the store. Did you know that on average Americans spend $20 per week getting lunch in restaurants? That’s $1,043 a year! Meal planning helps you not only save you time, but also money.

What other benefits are there to meal planning?

Just to name a few:

  • You will eat much healthier. If you know what you are cooking for the month, it surely does cut down on the amount of junk food and not-so-healthy options you put together at the last minute. We do tend to eat unhealthy when in a rush.
  • No more wasted food. Because you have your list and know what you will be eating for the month, you won’t buy any additional food that you will end up throwing out because it is expired.
  • Goodbye impulse buys! Going to the store without a list or idea of what your family will be eating is not a good idea in my opinion. All those impulse buys add up at the end of the month, and again, usually ends up expiring.

How to get started with meal planning:

  1. Calculate how many meals you will be prepping for. Will they be all three meals, or just dinner? Next, count the meals per person and then how long certain foods will last.
  2. Make a list of your families favorite things to eat. Looking for new recipes? Look up new recipes online.
  3. Use a calendar or notepad to figure out the menu for each day. I use a dry erase board that sticks right on my fridge, that way my entire family can see what meals are coming up. If you are techier, use an app! Also – this isn’t set in stone. If Monday rolls in and your family isn’t in the mood for lasagna, switch it out for another day of the week meal.
  4. Make your grocery list. Buy only what you have on your list, after reviewing recipes and knowing what you will be making for the month. Also – take into consideration while making your food plan that produce and foods that spoil quicker should be made earlier in the month.

Expect there to be some trial and error. Meal planning can really take a few tries before getting the hang of it. In a few months your spending on takeout is greatly reduced. The money we save by planning our meals is helping us to live debt free. By spending less in this part of your budget, you can split the savings between paying down a debt and adding to your emergency savings account.


‎04-17-2017 07:30 AM

Content provided courtesy of USAA.

By Angela CabanSave More by Creating a Monthly Meal Plan

Creating a Realistic Budget

It’s February; shouldn’t we already have our 2017 budgets created? If you don’t, please don’t beat yourself up about it. It is never too late to start planning and budgeting for the year. If you already have your budget created, perhaps there is something that you missed or need to change?

How do you create a budget and keep it realistically flexible enough to meet the needs of you and your family?

I have seen my budget fail four times. Why? Because it wasn’t realistic. We all want to be in a place where we are saving as much as we can and have little to no debt. It’s easy to sit down and write numbers down, such as “I want to put $1,000 a month into savings”, but what if that isn’t realistic. What do you do?

Here are 3 Ways to Create a Realistic Budget

Analyze Your Spending

You need to know what you have coming in and going out each month. Step one is to review all bank accounts and credit cards statements for at least three months. This will give you a good picture of where you stand for the month.


Using the Zero-based budgeting method (which is my favorite), list all your expenses for the month. Zero-based budgeting is a method in which you count all the money coming in, every single penny.

Once you have the amount of all the money coming in, you then make categories for all your expenses. By the time you add your budget for each expense, you should have a total of zero dollars at the end of the month. All the money is accounted for, but again, be realistic with what you are spending so that there are no surprises at the end of the month.

Track Your Spending

Even though you have your budget, you should always monitor what you spend. Because life happens and there will be moments when you may have to move some of the numbers around. Try to only do this during those emergency situations (car troubles, medical issues, etc.). Using an app on your phone may be helpful; I currently use Every Dollar and Money Manager.

Maintaining your budget is hard work, so reward yourself. If you stay well within or below your budget, treat yourself out for dinner or a movie. It is a nice reminder that while you are saving, you are also working hard and deserve a treat for a job well done.



‎02-13-2017 07:20 AM

Content provided courtesy of USAA.

By Angela Caban