Calculating a monthly budget isn’t something most 20-to-30-somethings often think about. But, as we all know, it’s so important to manage spending and keep financial expectations each week and/or month, just so to have an idea of what can be put away for both savings and an emergency fund.
Look, we get it, having (and sticking) to a monthly budget isn’t the sexiest thing to do. After all, just when you think you’re doing a good job, a friend’s birthday comes up one day, you decide to go out for dinner the next, and, all of a sudden, you’ve got some random expense that throws you for a loop. Hey, that’s life, guys, it can be a bit unfair.
Still, while calculating a monthly budget isn’t fun, it’s fairly easy. The difficult part is actually sticking to one, making sure you know what you’re regularly expensing. The last thing anyone wants to have happen is to wind up losing their job and being stressed out about how to maintain a certain lifestyle. That’s why financial planning and budgeting is critical.
Since we’re not all great at sticking to those financial goals each month (guilty), we’ve got some tips on how to set a monthly budget and actually stick to it.
Regardless of how your employment status is defined — full-time, part-time, freelance, contract, self-employed, etc. — the most important thing when calculating a monthly budget is actually knowing what you earn! Once you determine that crucial element, the general rule is that 20 percent of your income should go towards some sort of savings. Again, this can fluctuate depending on your employment status, but always have that 20 percent number in your mind regardless, because it’s best to save more than less.
The 50/30/20 rule is the general savings rule that 50 percent of take home income should go towards necessities like rent and groceries, 30 percent goes towards discretionary items like restaurants, bars and hobbies, and 20 percent goes to the aforementioned savings. This is the most common way of dividing up monthly income to help calculate a monthly budget.
Just because you’re living paycheck to paycheck doesn’t mean you still can’t calculate a budget for yourself. Sure, money might be tight, but there are ways to still live without completely turning into a hermit who has zero contact with the outside world. It takes willpower and learning how to say “no” a lot of times, but it can be done by simply tracking recurring bills (like fixed spending on rent, utilities, etc.), variable bills (like fluctuating money spent on groceries and entertainment) and keeping an emergency account just to be safe.
Whether you’re keeping a monthly budget template that you made at home and easy to follow, or you’ve found one of the abundance of options free to download online, it should have a simple way to visually see monthly expenses for tracking. Remember, this is your bible when it comes to spending, so posting it in a spot where you can refer to it each day to see how you’re doing will go a long way in sticking to the budget you’ve set for yourself.
You know all those friends of yours who cook on Sunday night for the week, planning their dinner meals for each day? That’s a really smart way of sticking to your budget. First off, it’s money you spent on food at the grocery store instead of out at a restaurant. Second, it makes you less likely to give in during the week when a friend asks to go eat out somewhere. Lastly, if you do give in and waste the prepped food by eating out, you’re actually spending more money by paying for dinner and tossing out the old prepped food. Not smart.
Credit cards are good for absolute emergency situations — like unexpected expenses on car repair or an unfortunate medical expense — but, for everyday use, they can be dangerous. Credit cards encourage impulse buying, according to Psychology.com, meaning more people are less likely to stick to that budget by using money they don’t really have. Interest rates are not your friend, so understand how to use credit cards and why they’re a bad habit into living off of.
No one carries cash anymore, right? Well, if you’re serious about calculating a monthly budget and sticking to it, you might want to start doing so. For instance, if you lost your job and find yourself antsy to get out of the house each day to have some social interaction, many people opt for coffee shops. That’s fine, but make sure you don’t rely on a coffee and bagel or pastry each time, as the daily cost could fall between $8-10 each time. Instead, take out $20 every Sunday for the week. Then, when the week starts, eat some breakfast at home, go to the coffee shop, pay your $4 for a latte and bang out some job applications. That $20 cash can actually last you the entire week on that routine, whereas debit or credit cards can lead to bad spending habits.
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