Ever listen to people and think to yourself, “They totally watch their money, they never mention stressing over it.”? It’s as if they’re wearing a t-shirt that tells everyone 'I watch my cash' or better yet, 'I'm a budgeter.'
Budgeters – those people who track their monthly expenses, presumably to keep them in line with their monthly income so that they have money to set aside for savings as well as the little extravagances we all need to keep us going.
You, too, can become a budgeter in four simple steps so that you can revel in the liberating feeling of not just knowing but directing where your money goes. It's another feeling that has been expressed on a few T shirts: “Control your money; don't let your money control you.”
Step 1: Become a “student of your spending” first
Before you dive head first into a spreadsheet, keep track of your expenses for at least one month after moving into your Chico apartment – and two months would be better. Using a computer program, an app on your cell phone or tried-and-true pen and paper, write down every single dollar you spend in that time period.
Once you can assess this picture in all its vivid detail, you’ll be able to set up a realistic budget from a position of knowledge and information. You’ll avoid the mistake that many people make when they write down best-guess or arbitrary numbers that fall far short of their actual spending.
In addition to avoiding the risk of working with overly conservative numbers, assessing what you spend before setting up a budget will give you a better idea of how much you can allocate for those daily extravagances and your long-term goals, especially vacations. Trying to reduce them may be a worthwhile goal; this is for you to decide. But eliminating them is another reason many budgets fail.
Step 2: Calculate your monthly income, after taxes
This can be easily done by taking a look at your pay stubs. Don't forget to calculate accordingly if you get paid twice a month, or find the average for the month if you get paid every two weeks.
Step 3: Find a spreadsheet or budget worksheet that works for you
Create your own Excel spreadsheet, find a template online to suit your needs or create a hybrid of the two. The Federal Trade Commission offers a budget worksheet that you can modify, deleting some headings while adding others that address your specific needs.
Step 4: Do the math
Financial experts are quick to note that “every monthly budget is different,” which is true. But it's equally true that when you have only so much money to work with every month, it helps to ensure the money you earn covers all the bases. They recommend the following breakdown:
- Chico apartment rent and utilities: 35 percent of your earnings
- Tax-friendly retirement savings tools (such as an IRA or 401(k)): 10 percent of your earnings
- Long-term savings (such as for a vacation or new car) 10 percent of your earnings
- Discretionary spending (car loans, student loans, grocery shopping, eating out, entertainment, clothing and other expenses that you have some control over): 45 percent of your earnings
There's a reason those two “forced savings” categories come before discretionary spending: financial experts generally agree that “paying yourself first” instills added discipline over discretionary spending. In other words, if you see you have only 35 percent left to spend every week on groceries and restaurants, you might be motivated to pack a lunch and bring it to work several days a week rather than run to your favorite Chico sandwich shop.
At the end of every month, review your budget to see how well you stayed on track. You might overspend one month, but at least you'll know so that you can compensate for the overage the next. Tracking your spending is vital if you want your monthly budget to work for you, long term.
Part of your budget should be going to your Chico apartment renter's insurance if it doesn't already. While paying the extra $11-$25 a month (depending on the plan you choose) may seem like a waste right now, but when you're place gets broken into or a fire happens you'll be glad you don't have to pay to replace everything out right. Download our guide to learn what exactly it comes and how you can add it now!