Budgeting Basics

No month-long commercial detox would be complete without a quick and dirty lesson in budgeting! If you are not currently using some method of budgeting to help you calculate and understand your monthly expenses, I highly suggest you give this a try. Since I am no financial guru, I can’t get into the nitty-gritty of allotting your monthly expenses, but I can help you get started on a path of personal financial management!

One day soon after I had graduated college, I was watching TV when I came across an episode of The Oprah Show that focused on personal finances. Much of the episode focused on helping couples break out of credit card and student loan debt, neither of which applied to me, however, they showed this great pie chart that they used on the show to give a rough outline of how to allocate your monthly expenses. I immediately grabbed the pie chart from the show’s website and have been using it as a guide for myself ever since

If you have never made a budget before, or if you’re not happy with your current budget, I suggest taking this chart, opening an excel file and starting to calculate how much you should be spending on each element of your expenses based on your total gross monthly income. Then you can compare what you should be spending with what you are actually spending! Make sure to grab your bank statements for the past few months when you do your comparison, because spending habits change from month to month and you need to take a look and see exactly how you have been spending your money over a good period of time. I suggest checking out your last 6 months of spending! While doing this comparison, you may find that you are spending too much on housing or clothing based on the suggested percentages and can begin to work towards finding a better balance in your budget. Once you can see where you’re overspending, it might make it easier for you to temper your spending in that area.

Obviously, if you spend too much on housing, it may not be as easy for you to put that spending back to the proper balance, but over time you can take actions like getting a roommate to cover housing costs or finding a more affordable apartment once your lease expires. In the meantime, you are going to have to cut corners somewhere, perhaps with eating out or personal entertainment, or by finding additional means of employment. I have already covered a variety of ways you can save money in different aspects of your life this month, so if you need to cut back on your entertainment costs, clothing or other personal purchases, click here to see my suggestions to make the most of your money!

Overall, I hope you came to see that budgeting is an important and necessary exercise in your life. Although you may not find that you have trouble covering the bills, taking the time to evaluate your expenses may show you where you are overspending unnecessarily and could be putting more money into savings for the future! Your personal savings is a place you really don’t want to skimp on each month, so the more you can put away the better. You never know when you will have an unexpected car repair or medical emergency that will require you to dip into your savings! Seriously, YOLO is not the financial plan you want to default to, so get your finances together asap!

Do you use a budget to help you keep track of your monthly expenses? Do you find that it helps you to make smart money decisions or is it something you reference after the fact to clean up your bills! Let us know in the comments!