How to Budget (Budgeting for Beginners)


Hey, I’m Suzanne with Arvabelle. In this video I’m going to go over how you
can create a budget that works, and how you can actually stick to it. Hopefully by sticking to a budget you will
be able to start saving or investing maybe paying off debt traveling or whatever else
is important to you. If you’re not already subscribed to the channel,
hit the subscribe button and we will get started. So I’m going to have a link in the description
to the budgeting sheet that I’m going to pull up in just a minute. But before I do that I want to go over some
of the ways that you can create your budget that will make you more likely to stick to
it. Before anything else you need to set some
sort of goal for yourself. If you don’t have a reason to stick to your
budget, you just won’t. It could be a responsible goal like setting
aside a certain amount of money every month to invest or maybe paying down your debt. Or it could be a fun goal like saving for
a vacation or a friend’s wedding or something like that. Whatever it is, have a larger reason for budgeting. So first we’ll talk about your income. You want to base your budget around what you
make after taxes. So for all of my fellow self employed people
out there, that means depending on your state’s tax rate, setting aside 15%-30% of your income
for good old Uncle Sam. I would also recommend creating your budget
based around when you get paid. If you are okay with a month-to-month budget,
that is great, but if you don’t get paid monthly and instead you get paid weekly or biweekly,
you may want to try creating your budget based around that and see how it works. Or let’s say you get paid monthly, but you
don’t get paid until the 15th of every month. In that case it may make more sense to create
your budget say from November 15th to December 15th rather than trying to do it November
1st to December 1st when you’re really getting paid in the middle of the month. I hope that makes sense. If you have a variable income like I do that
means that the amount of money that you have coming in changes form month to month. If that applies to you, and you aren’t getting
a regular fixed paycheck, what you want to do is take your last 6-12 months of income
and base your budget around the lowest income month that you had. Most people will say to do this for the last
3-4 months, but no. I am telling you the last 6-12 months. Especially if your work is even remotely seasonal
or affected by holidays because that can change your income drastically. And you don’t want to be unprepared if you
have a low month or two. So it’s better to base your budget around
those lowest months. Now you need to figure out how much you are
currently spending and what your needs actually are. You want to be recording all of your expenses. Go through your bank and your credit card
statements and record every transaction you’ve made over the last 3-4 months. You can do this in a spreadsheet or on a piece
of paper. However you want to do it. Just make sure that you sit down and you actually
look at every single thing that you are spending. It can be a tedious process going through
the last few months of expenses, but it’s really important that you do it. The difference in what we think we spend vs
what we actually spend can be quite surprising. So if you have never done this before, just
be prepared for a bit of a surprise. So then you want to go through and you want
to categorize your expenses so that you know exactly where you’re spending your money. And right off the bat you will probably be
able to identify a few areas where you will be able to cut back or cut them out completely. You may find that you have some recurring
monthly charges that are sort of going under the radar. If you notice that you are subscribed to Netflix,
Hulu, Amazon, and you forgot to cancel your HBO subscription after Game of Thrones ended,
there you go. You just found where some of your money is
disappearing to every month. And I’ve said this in another video, but
ideally you want to know your personal finances so well that you, off the top of your head,
know how much you have coming in every month, and how much you have going out every month. In order to stick to your budget, you need
to be realistic with how much you are actually trying to cut back. In my opinion it is better to go slow and
steady and stick to your budget, than to make such a drastic change that you end up not
following your budget, because it wasn’t sustainable. If you need to cut back in a drastic way to
make a payment on time or to pay debt or something like that, go for it. Do what you need to do. But start having a longer term budgeting plan
that you will actually be able to stick to. That way you’re not stuck in the cycle of
overspending one month, and then cutting back the next month, overspending the next month,
and then cutting back the next month. Now I will pull up the budgeting spreadsheets
that I made. So like I said the link to this will be in
the description below. And you put in your email, it will send you
this Google Drive link, and all you have to do to be able to edit it is go to File>Make
a Copy, and that will copy it to your drive and then you can edit it from there. And it’s free all that I ask if that you
like this video and subscribe if you like free things. So you’ll see a few different pages down
here. Over here on the first sheet which is what
we are on right now, we have estimated and budgeting columns on everything and then the
actual amount that you spend. So we have income at the top over here and
then also at the top WHERE IT SHOULD BE is debt payments and investing and saving. I purposely put these at the top because this
is what you should be doing first. As long as you have a roof over your head
and food on the table, you need to be paying yourself first putting money towards emergency
funds, investments, paying off debt. Take care of all of that first and then you
can spend whatever is leftover. If you know that you have a hard time getting
yourself to set aside money for saving or for investing or paying off debt, set up automatic
transfers so that you don’t even have to worry about it. You don’t really even have to see the money
it’s sort of out of sight out of mind. And whatever you have left after those automatic
transfers, that is what you have to work with in your budget. And we have a bunch of different categories
down here. Customize this however you need to. Like if you don’t have kids but you have
a business or something like that just change it, make it work for you. I also, I didn’t put a column on here for
sinking funds, but if that is a budgeting method that you like to use, you can totally
add that. On this second page we have a monthly expense
tracker. So you can do this to track your expenses
every month to see which accounts money is coming out of and actually you can use this
also for recording your last 3-4 months of expenses. You can just go down, select these two rows,
and drag it down and you have a million rows to record all of the times that you went to
Chipotle in the last 3 months. This third page is just for recurring expenses
and to keep track of which ones you’ve paid and when. And the fourth page is a net worth tracker
or your very own personal balance sheet. I think that tracking your net worth is especially
great if you are paying off debt or if you are working on building your investments because
it makes it really easy to see your progress or if you aren’t making enough progress. So, your net worth is all of your assets minus
the liabilities. So that’s money that you have minus money
that you owe. And when you enter number up here it will
make a nice little graph for you down here. And this is fun to watch as your net worth
goes up. And you may find if you do have a lot of debt
or a lot of outstanding loans, your net worth may be negative and that’s okay as long
as you are working on getting it to zero and then getting it to a positive number. I really do hope that this provides some value
for someone out there. And again the link to the spreadsheet is in
the description down below. Remember to subscribe and drop a like. I hope that this makes it a little bit easier
for some of you to start tracking your expenses. Also, remember to follow us on instagram and
visit our blog Arvabelle.com. Thank you guys so much for the support especially
Ryan Giffin, Adventures and Us Investing, Alicia does Adulting, and Squintillions. Y’all are awesome, thank you guys, and I
will see you in the next video.

25 Comments

Add a Comment

Your email address will not be published. Required fields are marked *