Budgeting 101

Saving money, having money, watching my money is something I struggle with. I developed some weird habits with money from being dirt poor in uni. I would always pay everything off that needed to be paid and then I would spend the remainder of my income on whatever I wanted. Sounds like a good plan? Well, yes back when I had very little surplus income, it was a great plan. However, now that I have joined the adult world, I need to figure out how to deal with my money like an adult and that means budgeting. Below is the strategy I am using so far:

  1. Write down a list of your income on the one side of the page, and on the other side of the page your expenditure. So for example for income, it would be pocket-money, grants, salary etc and for expenditure, it would be food, rent, phone bills, clothes, socialising etc.
  2. 50/30/20: The 50/30/20 rule states keep 50% of your income for necessary things e.g. rent, food etc. Save 30% and spend 20% on fun things. Look at your own spending habits and see how fitting your own spending habits are to this model, and try make them look like that. For example:

Say Joan earns 2000 euro a month. 1000 euro goes towards all her necessary expenses such as her phone bill, her rent, her grocery bills etc. She then has 1000 euro left over, 600 euro she puts away for savings. She then has 400 euro for fun things. This can cover going out with friends, going on holidays, buying new clothes, getting your hair done etc.

3. Now that you have your plan of how you want to spend your money, use this plan. As soon as you get your income in every month, try pay off your pressing expenses such as your rent, credit card etc and set up a direct debit to pull your money into a savings account before you have a chance to spend it.

4. Another thing I have started doing recently is making a note on my phone whenever I spend money and a rough idea what I spend it on. I have only been doing this for the month of February but I am already shocked at how much the little things at up and can see very quickly where all my money is going.

5. Every two weeks, check how you are doing. Check your notes to see how much you have spent and see if you are on target. If you are not on target, learn to pull back a bit. If you are on target, rejoice and use some of the fun money to buy yourself something cute or go out to the movies with friends etc.

So there you have it, make a plan with your money.