Everyone agrees that a budget is a must if you want to get serious about being smart with your money. It doesn’t matter how much you make or your financial goals; without one, you will not be able to reach them.
If you’re ready for this next step in becoming financially responsible and realizing your goals, click here for some advice on how millionaires budget and create budgets. You’ll see what they spend their money on (housing costs!), the blunders we all make, and how they fix them.
Budgeting is one of those things that can seem scary at first. It’s like, ok, I have all this money coming in, but so much going out—how should I be spending it? Where should I even start with making a budget template?
These are some common questions that typically come up when people are thinking about budgeting. We’ve written up some notes here to cover some budgeting basics.
How much money should I expect to make?
The amount of money you will make from your company depends on a few things:
How much time do you spend at work?
How much time do you spend working on your own business or starting side hustles?
How many hours per week are you willing to work?
Your wage will vary depending on your position (for example, a manager of a global corporation will make more money than a receptionist), your work experience, and the size or profitability of the company.
How much should I be spending?
The amount you should spend depends on how much money you make, how much you have saved, and your expenses.
For example, if you make $100,000 a year and have $50,000 in savings, you should be spending at least that money to support yourself. If you have $5,000 saved up in a high-interest saving account with no spending or lifestyle expenses and plan to work 40 hours per week going forward (at minimum wage), then your budget is covered.
The main expense that should be accounted for is housing. While you must plan for some living expenses down the road, the bare minimum rent (or mortgage, utility, and property taxes for a home) should be covered.
You should also have some money aside for food (assuming you don’t have a full-time chef in your house), car maintenance, clothes, and any unexpected expenses.
What are things on my budget?
Budgeting is all about setting aside money each month to prepare for the future and keep yourself from going into debt. You can use a common budgeting tool called a monthly spreadsheet to keep track of your expenses.
Many online resources help you make one, or you can download ours here.
You should include all the things on your monthly expenses (i.e., rent and internet) and any big-ticket items (i.e., vacations and insurance).
How much stuff should I be buying?
While it’s important to budget, you don’t have to stick to a strict budget and try only to spend a certain amount each month. You can choose which expenses are more important and what you want to save for down the road (or tap into your emergency fund if you have one).
There is no right way of doing this. It largely depends on how much money you make and the time you want to spend at work. If you can work from home full-time, you can even decrease expenses by increasing your income.
Do I need to budget for savings?
Some people believe that having a savings account is necessary to succeed. While you can’t live without a savings account, having one is unnecessary and can, in fact, lead to less money overall.