How to Budget and Save for Things You Want

We all know what's happening right now. There are, last time checked, nearly 22 million American's suffering from unemployment as a result of COVID-19. This also means many that those still employed are looking to save money because of the economic uncertainty or they happen to find themselves having to help family members through these tough times. Regardless, I believe in being responsible with money, so you never find yourself in a bind for unexpected expenses. I'm also a big believer in the "treat yourself" motto, so while I am saving I can still have money left to make fun purchases.

Disclaimer: I'm no financial advisor or even have a background in finance. If you're new here, I'm actually a digital marketing specialist, but like everyone else, I've had to learn how to budget once I got my first job. In an effort to help my friends learn how to budget and save efficiently while still treating yourself, I finally decided to share how I manage my money to everyone that reads my blog!
I've watched Dave Ramsey videos and read the blogs, I've also followed The Budget Mom's blogs, and countless of others on YouTube. However, I'm not a cash person, never will be. I find it easier to blow through cash because my brain goes, oh well I have money in the bank, so this cash doesn't count. For the past 2 years, I've followed a "Digital/Cashless Envelope" budget setup. The other thing that I didn't particularly like about other budgeters is having a "Zero-Balance Budget." I could never agree to not have anything in my account because I've budgeted the crap out of it. 

Why I Started Budgeting

Like most Millenials, I'm saddled with student loans and credit card debt. I got recommended a video on YouTube from Dave Ramsey, and it was about Debt Avalanche vs.  Debt Snowball. I've come to the conclusion that student loans will always be part of me, so my goal was to lower or rather get rid of credit card debt first. If you don't know, the Debt Avalanche is making minimum payments on all debt and then using remaining money to pay the debt with the highest interest. The Debt Snowball is actually about paying off the smallest to largest credit cards regardless of interest. 

I chose the Debt Snowball route. This is actually the fastest way to pay off debt, according to many people on the internet. Also, I can attest to this. I'm finally credit card debt free!

Looking at Your Income as a Monthly Overview

Many people live paycheck to paycheck, so this method of budgeting might be the easiest way to budget. 

Step 1: Write your monthly income source down. 

That means all sources, your weekly paycheck (or expected), semi-monthly, or monthly. Similarly, include your side-hustle things like selling stuff on eBay, Etsy, etc. 

Step 2: Write down your monthly fixed expenses.

Fixed expenses are charges that never change and that are always expected. For example, rent/mortgage, car loan/lease, Netflix, Hulu, Apple Music, Cell Phone, etc. 

Step 3: Write down your variable expenses.

Variable expenses are charges like electricity, water, credit card (check those financing fees and card balances, especially if you keep charging. These minimum payments will change).

Step 4: Calculate your spending/savings budget.

Now that you have finished writing down your income and expenses, calculte your spending/savings budget. Do the following formula:

Spending/Savings = [Total Income] - [Fixed Expenses + Variable Expenses]

Congratulations! You now know what you have to spend, save, and allocate towards your debt.

Step 5: Write down your savings goals.

Do you have a rainy day saving or an IRA? Write down how much you want to save for these and have an automatic withdrawal. 

Step 6: Write down your sinking funds.

You're probably asking yourself what are sinking funds. Many people have different definitions for this, for some, these are saving goals, spending goals, or even small savings budgets. The way I've gone about this is by creating categories of things that are needs and wants. For me, I have a:
  1. Food/Groceries sinking fund
  2. Gas Fund, Car Maintenance
  3. Entertainment
  4. Self-Care
  5. Christmas fund.
Remember, step 4? This is where you'll figure out how much of that money you'll allocate to these. Again, this is my method, and it's worked for me. 

For example, I wanted to save a minimum of $600 for Christmas gifts, so since January, I've set aside $50/month to be withdrawn from my account at the beginning of the month so by December 3rd, I will have met my goal.

Another example, I determined my Gas Fund by my patterns of driving. I usually deposit $100 into another account specifically for gas and only spend $50 a month, pre-COVID. Now I've spend $10 of premium gas in 2 months. 

For groceries and eating out, I lump together than separating it. I can see my average spending month-to-month based on my card charges. I've figured $400 is an accurate amount. Again this was pre-COVID, now I hardly ever eat out. Brunch really takes a good chunk if I go out every Saturday.

For self-care, think about your hair appointments, nail appointments, are you skipping them now? Your fund could be very cushioned until you can go back or maybe take that allocated monthly amount and set it for lowering debt. I personally use this fund as a clothing and shoe fund. 

Step 7: What's left of your money now goes to your debt.

Ok, let me rephrase that, leave some of that money in your main checking account. The other? pay what you feel comfortable with and give a second payment to your credit card with the lowest balance. Keep doing this every month until you go to your next card and so on. It's not all going to go away in a couple of months if you have many and large balances. From articles I've read in the past, on average, it takes a person 18-24 months to be successful. 

Remember that zero-balance budget? Leave a cushion of a minimum of $200 in your account for unexpected variables. Sometimes you'll overspend on food or entertainment, and that's ok cause you'll have something to fall back on to. Just don't rely on it. You have your sinking funds and rainy day savings to keep you in check.

Digital/Cashless Method

I mentioned above that I don't like using cash. Similarly, with the situation of COVID-19, it's been advised to use debit cards since it means less handling of paper. I use Capital One 360 online banking as they let you have 3 Checking Accounts, up to 25 savings accounts, and IRA accounts. Discover online banking has cashback which is great for if you use it for a Christmas fund. BBVA bank has a free online bank too and this can be another option perhaps for a Gas Fund. American Express Serve has free checking online banking too with cashback that I love to use for my Food fund because you also can earn points. Chase bank also has an online banking option. All of these are FREE! No bank fees, we're trying to save money here, not spend it on monthly banking fees.

Yes, you're carrying a lot of debit cards, but I personally feel safer carrying that versus a number of cash envelopes. Also, cash envelopes don't give you cashback bonuses. 

I created a free worksheet that anyone can download so you can write down all this information. Print out as many as you need. I'm in the works of creating an all expenses tracking sheet so you can get a better picture of how you spend your money. It's really eye-opening, even though I have digital banking, it's always great to see what your spending habits are like. That's how I figured out how many times I truly spend on Amazon. 

Printing Instructions: Set the PDF to print as "Fit" so it prints properly. You can print this in black and white and it still looks good despite the faint color cells.

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