Living on a budget is one of the hardest things about being an adult. Figuring out what your budget needs to be and understanding how to allocate your funds can be difficult, but it’s so important to living a sustainable life. I used to think I was broke in college, but I didn’t know broke until moving out on my own to Nashville, TN. I also feel obligated to mention that there is a huge difference between being broke and being poor. This video by The Financial Diet outlines those difference perfectly. While I may not be able to afford a trip to Europe, I can afford to put food on my table and live in a nice apartment.
I started budgeting when I switched jobs. I was making significantly more money at a different job, and when I switched, I needed to start budgeting more strictly to live within my means. The number one rule of living on a budget is to live within your means. Don’t pay off one credit card with another credit card. Don’t only pay the minimum on your credit card balance every month and let your interest build up. Live your life, but live within your means. I’ve got Pottery Barn taste on a Target budget, so I know how hard it can be to stay on budget, but for me, staying within my budget saves me a lot of worrying and anxiety because I know I have plenty in my savings account if anything were to happen.
It can be hard to create a budget if you don’t know what your living expenses are like, so before setting strict budgets for yourself, I recommend tracking your spending for a few months to take note of any spending patterns — figure out where you are spending your money, where you can cut down on spending if you have to, and where you can start saving.
I’m by no means a Master of Budgeting, but I have a good beginner’s idea on how to create a budget and how to stay within in. Let’s get started!
1. Create a budget.
The number one step to living on a budget is having a budget to live on. I’m fortunate enough to have people around me that are incredibly good with money (my dad is a CPA and my best friend works in finance), and who are always willing to help me better allocate my money. The simple way to start a budget is to start with the 50-30-20 rule. This “rule” states that 50 percent of your earnings should go toward your fixed expenses (non-discretionary money — money that goes towards your needs, like rent, food, car insurance, etc.), 30 percent of your earnings should go toward your discretionary expenses (eating out, going to the movies, etc.), and 20 percent of your earning should go into savings (a straight savings fund or an IRA/401k).
2. Find free, fun events to go to with friends.
In a sense, I’m really lucky to be living in a big city. While it can get expensive at times, there are also so many free, fun events going on around me, especially in the summer, that its easy to find something free or low cost to do. Some of my favorite free/low-cost events to attend are movies in the park, farmer’s markets, art festivals, and free concerts. You can also do things like picnics in the park, walks around the city, or coffee dates at local shops to spend time with friends but not break the bank.
3. Be open about your financial situation with close friends.
I’m really open about my financial situation — possibly a little too open, I’m sorry — but it’s better for friends to know your situation than wonder why you’re always saying no to nights out on the town. You don’t need to give them the breakdown of your budget, but telling them you’d love to spend time with them, you just can’t afford expensive nights out every weekend is perfectly fine. While it’s important for friends to respect your financial situation, it’s also important for you to respect theirs. If they can afford to go to more events/activities than you, you just have to accept that. I’m not saying it’s going to be easy, but it will be worth it when you can sleep without having nightmares about your credit card bill stalking you.
4. Utilize budgeting applications.
Every budgeting app essentially does that same thing — so anyone that tells you you need to use THIS app is just really comfortable with that app, which is fine. My favorite app is Mint, but it does exactly the same thing as Every Dollar and You Need a Budget, so feel free to pick whichever platform fits your needs best. With Mint, I set up an initial budget when I first moved, and then started tracking my spending. Sometimes I need to reassign my spending (for example, all my Target purchases are inputed as “Home Supplies” when they are really “Groceries”) but I’m in such a habit of checking the app that it really doesn’t bother me. Budgeting apps are great because you can just link your credit cards to them and they do all the work. Mint shows me a breakdown of my spending by line item, category, and overall measures.
5. Allow for miscellaneous spending.
Miscellaneous spending might be my biggest spending category aside from my rent. This is where I throw everything that isn’t a common expense and I don’t budget for, like Lyft rides, household items that need to be restocked, gifts for friends birthdays, etc. You can’t budget for every little thing, but creating this category means you know you’re going to have some wonky spending habits. The most important thing is to know what you’re spending your money on.
6. Thrift shop!
I’m going to admit that I’m not the best at thrift shopping because I don’t have the patience for it, but if you’re someone who likes to shop, I definitely recommend thrifting. I’ve known tons of people who have found hidden gems at Goodwill or local thrift shops — I just never have that kind of luck. Thrifting can also be really fun if you like to don unique pieces. For thrifting inspiration, check out Girlboss on Netflix, the original thrifter!
7. Pack a lunch.
Food gets me every time. American culture revolves around food and eating out. I’m in the “making friends” stage of my life in Nashville, and the easiest way to make friends is to go out for dinner or drinks. Since I know I need to allocate some money toward social food adventures, and I also know that sometimes on Sundays I really just don’t feel like cooking, I try to meal prep for all my lunches during the week. This can be hard since some of my co-workers really like to eat out, but I’ve gotten pretty good at saying no and just enjoying whatever I’ve packed for the day. It saves at least $50 a week if you account for about a $10 per meal.
8. Evaluate non-essential spending, and see where you can cut.
This is something I participate in regularly. At the end of every month, I record all my expenses in an Excel document (using what I tracked with Mint throughout the month) and see where I may be spending too much. Whenever I make a non-essential purchase (clothing, makeup, etc.), I also calculate how many hours of work the item would equate to and if it’s really worth that to me. That might sound crazy, but it’s a great way to think about how you’re spending your money. When you’re earning it yourself, you want to spend it on things you really want/need. I’d also rather spend my money on experiences than things, so I remind myself of that when I’m making non-essential purchases. I did a month-long challenge of not shopping for any new clothes back in March, and you’d be surprised how much money I have saved since then.
9. Utilize reward programs.
I eat, live, breath Target. It’s where I get 80 percent of my clothes, it’s where I grocery shop, it’s where I buy home decor — basically, if I can get it at Target, I probably do. This is great for my wallet because Target is pretty affordable, and I also really love the style so it works out for me. Since I do a chunk of my monthly spending at Target, it made complete sense for me to sign up for a Target RedCard. I save 5 percent every time I shop. Every time. It also doesn’t cost me a dime to have the card as long as I pay off my balance every month, which I am religious about doing. I’m not saying you need to get a Target RedCard, but if you find a place you’re going frequently (Starbucks, Harris Teeter, etc.), and they have a reasonable rewards program (you don’t need to pay for it), there’s no reason NOT to sign up for it. Also, look into rewards programs like Ebates. Ebates is an online reward program — basically any time you shop, you get money back. While I don’t do a ton of online shopping, I’ve already earned money through Ebates. The important thing is to buy what you need while utilizing the reward program — don’t shop because you’ll get money back, shop because you actually need whatever you’re buying.
10. Reward yourself.
I live my life on a pretty strict budget (in my opinion), but that doesn’t mean I stop myself from buying everything fun. If I haven’t eaten out in a week, I usually treat myself to either Panera or Chipotle on a Sunday. If I stay under my budget for the month, I treat myself to a movie. And if I go an entire month without buying a new clothing item, I’ll treat myself to a new dress (which usually only costs me $20 at Target). It’s important to stay in budget and pay off credit cards, loans, and debts, but it’s also important to Treat Yo Self every once in a while.
While I don’t think I’ve got this budgeting thing completely down, I know I get better at it every single month. Budgeting is hard. Adulting (sorry to everyone that hates people that use “adulting” as a verb) is hard. But we’ve got to do it. Let me know your budgeting tips in the comments below!