Budget Basics

Part One:  A hard look at your spending.

Once you’ve identified your goal – debt payoff, amassing wealth or somewhere in between – having a budget is an important starting point in making those dreams a reality.

Gather all your bills, credit card and bank statements, and get ready for a come to Jesus about how you’re spending your money.  Even if you’re going to break your budget down to semi-monthly or other shorter budget cycles, which we’ll talk about later in this series, it’s good to start with a clear picture of your expenses during an average month.

Most things are better with wine.  Budgeting is a rare exception.  The best beverage to have at your desk when creating a budget is a strong, home-brewed French press (because budgeting doesn’t have to stifle sophistication) with an extra shot of moxie.

After you’re sufficiently caffeinated, begin with a blank spread sheet.  Create two columns, the first for essentials and the second for their corresponding average monthly cost.  To help get you going, here’s a list of typical needs:

  • Rent or mortgage
  • Utilities (if you don’t have fixed monthly payments, use your highest bill for the last 12 months)
  • Food (do include groceries, don’t include happy hours, fast food or date nights out)
  • Household items (from toilet paper to toothpaste)
  • Gas or the cost of public transit
  • Day care
  • Insurance (car, health, renter’s and homeowner’s, and if you have kids or others who are dependent on your income, term life insurance is also an absolute necessity)
  • Cell phone
  • Student loan payments
  • Credit card minimums
  • Other debts

In addition to monthly bills, think about any bills you might have annually or semi-annually, like taxes and car registration, and do the math to average the cost of these per month.  Add those items and the average monthly expense to your spreadsheet.

Once you have all essential items listed with the amounts you’re spending on them, tally up the total amount you’re spending on just these things.

Here’s what this might look like:

Budget example

Compare the total against your average monthly income.  If your monthly income is variable, use your lowest earning month of the last year.  In addition to your wages, include reliable* (*key word: reliable) streams of income like child support, alimony, rent payments, etc. in your average monthly income calculation.

If you’re spending more than you make or are just barely breaking even, you have hard choices ahead.  But you’ve already created a Pinterest board with designs for your beachfront cottage (full of swoon-worthy shiplap) where you now plan to retire by 45, so scrapping your dreams and going back to the before of not knowing any better isn’t an option.

So you’re going to have to learn to hustle.  What is hustle?  Hustle is looking for opportunity.  Marketing yourself.  Being hungry.  Being brave.  Being relentless.  Working damn hard.

You can hustle to increase your income, through networking and applying your way a better job, having no shame in getting a second job at the same place you worked in high school, or picking up side gigs by advertising your skills on Fiverr, driving for Uber or using micro job apps like Field Agent, Gigwalk and EasyShift.

You can hustle to decrease your spending, by ride sharing to work or finding free ways to get to around, moving into less expensive housing or rooming with a friend, family member or carefully vetted and background-checked Craig’s List applicant, trimming your food budget by shopping smarter (i.e. Aldi instead of Whole Foods) and changing your diet (think of beans and rice as a trendy new cleanse).

My advice?  Do both.  Hustle to find creative ways to increase your income and decrease your spending.  Work hard for your money, but make your money work hard for you.

Next in the series:  Needs vs. wants, savings, and your sanity.

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