Posted on: Jul. 05, 2017 in Money

You rarely hear anyone truly excited about spending some time budgeting. It’s boring, tedious, and, if you’re not doing it right, it’s time consuming. For many people, it’s the painful realization that they don’t make as much money as they’d like, their debts are too high, or they spend more than they should. If you look at budgeting like this, it’s no wonder you wouldn’t want to do it.


But budgeting doesn’t have to be difficult or eat up an entire day. It’s also a great tool to help you rein in your spending and meet your financial goals. The first step is to categorize your spending.

  1. Monthly Musts. First up, figure out your musts. Think of things like rent or mortgage, utilities, cell phone and internet bills, and other items you’re contractually bound to pay (like your gym membership). Also include minimum debt payments.
  2. Sporadic Spends. Next, list the things you pay for quarterly, annually, or randomly. You could include insurance premiums, summer camp for the kids, tuition payments, or even end of the year holiday spending. Add up the totals and divide by 12 to get a monthly amount.
  3. Future Finances. Third, list things like building your emergency fund, paying off debts such as credit cards, an auto loan, or student loans. It could also include a big vacation or a down payment on a home. Again, you’re looking to estimate how much you need each month to hit those goals you set out.
  4. Nonessential Numbers. Finally, add up the ways you typically spend money each month. This would include Friday night happy hour with your work BFF, beers with your buds while watching the game, eating out, lattes, mani-pedis, movies, shopping and anything else that is flexible and non-mandatory.

Next, you’ll need to add up your income. This can include a day job, a side hustle, or any other regularly anticipated money you receive each month. Once you have that amount, you’ll start subtracting your expenses. Begin with the Monthly Musts and work your way down the first three items on your list. The number you’re left with is what you have available to cover those nonessential items. Do you have enough? Great. If not, it’s time to make some cuts.

Identifying the things you need to spend on and setting yourself up to have the money you’ll need down the line is the first step toward financial stability. While there’s nothing wrong with spending money on fun and entertainment, doing so without taking care of the top priorities will leave you in a hole each month.

You’ll want to revisit this list from time to time and adjust numbers as you pay off debts and cut back on expenses that you no longer deem necessary (Did you cut cable or start working out at home instead of the gym?). If you get a raise or another job, this will allow you a little more flexibility with your budget as well.

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