It’s a bad word for a lot of people. I’ve been in the other camp that finds it to be of the less restrictive sort… and more of an efficient plan for all of my dollars. You can’t manage what you don’t track. Isn’t that what they say?
The good news is that there are many ways to budget. Here are a few of the mentionable ones that I’ve tried/considered:
50/30/20 rule (50% goes to needs: housing, food, etc., 30% goes to wants: eating out, that new purse, dog clothing, and 20% goes to savings/debt repayment)
Anti-budget (figure out what you need to pay to live, choose your savings, and spend/do what you like with the rest)
Zero Sum budget (every dollar gets devoted to something (debt repayment, bills, savings, investing, etc, so you’re left with 0 dollars at the end of the month)
60% Solution (60% of your budget should cover the things you’re committed to including bills to live as well as subscriptions in your day to day. The other 40% is broken up into 4 increments of 10% to each retirement, long term savings, short term savings and fun)
There are others out there and there are variations of these, but these are the biggies, I’d say.
Several years ago, I was very intrigued by the 50/30/20 budget and I tried to structure my budget based on it. I found, though, that I couldn’t fit my living expenses under 50% of my take home pay. At the time I was living in the cheapest apartment that I felt was safe in my area and it was accounting for a substantial chunk of my income. I used this as my baseline though, and kept adjusting items so that every dollar of my income had a job (and several of them slid over to the other percentages), which ultimately translated into a zero sum budget.
I know many people will be less than thrilled with logging every transaction each month and giving several categories a monthly allowance, if you will, but that’s what works best for my type A brain. Even if you’re not thrilled about doing that, stay with me.
I have worked a job with an inconsistent income for most of my working life. I was a server for many years and these days I have several types of gigs I entertain while surfing the self-employed wave. What I did then, and what I do now, is set a goal for every shift or every day. I base this goal off of my necessary living expenses.
When I set up my budget, I listed each bill that is a fixed amount first and then I listed each category that is flexible and I set an amount for each of those that I thought was reasonable and adjusted as needed.
We’ll use my living expenses to break it down.
Car Insurance: $100
Jeep payment: $258
Cell phone: $80
Discover loan: $369
Savings goals: $168
The beauty of this system is that if you’re competitive at all, you can challenge yourself to come in under in each of your flexible categories. I’ve always budget based on the maximum amount that I could spend in that category to give myself some breathing room. I never want to be stressed that I can’t get to work because I don’t have any more money in my gas budget. Same with grocery – I never want to feel as though we don’t have enough money to put food on the table. Talk about a fast track way to feeling poor.
Take my gas budget, for example. I based that on filling up my Jeep three times per week at approximately $30 per fill up. I chose this number when I was contemplating driving WAY more than I currently do. If I choose to go back to doing that, I have the room to do that. If I don’t, I’ve got at least $100-200 in built in cushion (because I actually fill up every 7-10 days). I can choose to either roll that over into next month’s budget (I always do that with the grocery allowance) or do something else with it.
Usually, I’m going to come in under the numbers that I set and I will be able to make up for making less money than I thought I would (if it’s an off day, or if I get sick), or I will have extra at the end of the month that I can use to make an extra debt payment, take a weekend trip with, invest, etc. I consider it to be like a bonus for being responsible all month.
So, my total bills for the month equal $1920. I have to make this amount of money to check all of those boxes. You’ll see that I include some basic savings (I use Qapital and have different goals set up to save money each week– for basic savings, investing, trips/vacations, and for those big vet bills that pop up when you’re not ready for them) and a fun money line in the have to have part of the budget.
(Side note: I think everyone should include a fun money portion. If you’re trying to aggressively pay down something/save, then make it minimal but give yourself the option. It’s the only way you’re going to stay the course.)
Now I consider how many days of the month there are and how much I need to make each day to get to that number.
$1920/30= only $64 a day! Add 30% tax to this because I’m self employed, and my number is now $85/a day. Bonus: If you’re not self employed, you should relish in that extra $20ish/per day you could keep!
Now I have a monthly goal that is broken down into a daily goal and I can see day by day whether I’m on track or not. Anything above that $85/day is truly extra (although I don’t count that until the end of the month in case there are a few days that don’t clock in at or over $85).
I use a paper planner to log each of my spends and subtract it manually. For me, this helps balance the lack of pain when swiping my credit card for purchases. I also log how much I made for the day in a spreadsheet that is broken down into each gig and auto tallies the amount for the day, has a running total for the month and also tallies per gig so I can see what’s bringing in the most. (You can see/download it here and tweak to your own gigs if you like)
By setting a daily goal or a shift goal (like I did when I was a server), I knew at the end of the day/shift whether I was above/under my goal and I could adjust what I did for the rest of the week/month to accommodate.
Half the battle is knowing what you’re working with and the other half is figuring out the system that works for you. If you’re absolutely not going to go back after a trip to the store and write it down in a notebook, a digital version like Mint of YNAB may work better for you.
Another big part of budgeting success is automating whatever you can. Any person who is even mildly interested in personal finance will tell you to automate your savings/bill pays. I personally use Qapital to do a lot of the savings parts and I manually move those extra “bonus” amounts at the end of the month.
For those of you who don’t have a set paycheck, I hope this look into my budget was helpful. If you do it differently, I’m always looking for better ways to do everything! Let me know in the comments 🙂
p.s. If you’re interested in setting up set and forget weekly goals to save towards or challenges that earn you the right to spend money (I have a rule that saves $2 every time I hit 10k steps for vacation spending money), you can sign up here or use my referral code: 5h9b42r2 and we both get $5!