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How To Budget Monthly For Beginners | Step By Step Guide (Free Budget Template) - YouTube
Channel: Bukola
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- Hello, money queens.
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I'm Bukola, and welcome to "The Come Up."
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Today, we're gonna be talking about
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a topic that's near and dear to my heart,
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and I love doing it all the time.
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And it's budgeting.
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I know a lot of people can
see budgeting as something
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that's boring and depressing,
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just makes you feel really sad,
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but I see budgeting as a
way of planning your money
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to help you reach your goals.
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Like think about it.
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What goals are really near
and dear to your heart?
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Are you thinking about maybe
taking a really great vacation
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in the next couple of months?
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Do you have a goal of like
retiring when you're 30?
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Well, guess what?
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Budgeting can allow you to do that.
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Budgeting is just a way
of planning your money out
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so that it helps you reach your goals.
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That's literally all it is.
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Planning your money out so it
helps you reach your goals.
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So guys, let's get started.
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Also, please bring out your pen and paper
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or your spreadsheets.
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It's gonna be very interactive.
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I also have a spreadsheet
down below that you can use.
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And also, follow along with me.
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You can put in your real
numbers and you can kind of,
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by the end of this video, you'll
basically be able to budget
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and we'll be budgeting together.
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So let's get started.
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(ambient music)
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So before you even write
anything down on the spreadsheet
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or pen and paper, the first
thing that needs to think about
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is what are your goals?
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Like what do you want your
money to be doing for you?
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Do you have a goal of maybe
retiring when you're 30?
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Do you have a goal of just
maybe taking a really nice trip
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or buying a really expensive bag?
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Just take a second and just
reflect and think about
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what goals do you want to reach
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when you're making this budget.
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Budgeting is not gonna be fun
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if you don't have a general direction
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about where you want your money to go.
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And so just a little bit of context,
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this budget will be using
the 50/30/20 principle
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and also the zero-based budget principle.
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So the 50/30/20 principle
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is a principle where you
spend 50% of your money
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on things that you need.
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Remaining 30% used on things you want.
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And that's basically money
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that's free and clear for you to use
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on whatever you want to use for.
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And then 20% is money that you save.
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This is just a starting
point and general framework
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about how to budget your money.
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But ultimately, it's up to you to decide
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what specific proportions you
wanna dedicate your money to.
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Then finally, the zero-based budget
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is just basically giving every
single dollar an assignment.
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No dollar will be left
behind with this system.
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Every dollar has a job, every
dollar will be assigned,
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and no dollar is gonna get away from you.
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Every dollar is gonna be planned out.
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That's what the zero-based budget is.
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So with these two different frameworks,
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we can kind of create a budget.
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So guys, I hopped right
back behind my desk
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to show you guys how to budget.
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Let's go to this spreadsheet.
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As you can see, we have income,
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and then we have our savings.
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Our goal is to get to
about 20% in savings.
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But remember, the 50/30/20
rule is just a guideline.
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It matters more about how
you feel about your budget
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than making everything fit
perfectly into these boxes.
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So our goal is to get
to around 20 in savings.
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We have about 50% fixed expenses
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and about 30% flexible expenses.
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The first step is to figure out
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what your after tax income is.
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You have to be extremely precise
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because remember what we
said, every dollar matters.
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No dollar will be left
behind with this strategy.
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So we have to make sure that
every dollar is given a job.
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Okay, if you're someone who's a new grad
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and you haven't necessarily
started your job,
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but you've got an offer letter,
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you can use this very handy
calculator called SmartAsset.
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SmartAsset allows you to sort
of you plug-in your salary
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and then it will let you
know what your take home is.
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So with our take home,
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I deducted just a very
small amount for the 401K.
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This kind of leads to the
first step in budgeting.
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The third step in budgeting,
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which is you need to pay yourself first.
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Saving is extremely important
and you wanna make sure
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that you're prioritizing
your long-term savings goals.
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As a good starting point,
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you need to kind of like figure out
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how much you wanna put towards retirement.
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I know a lot of people
are a little hesitant
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about putting money into their 401K,
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but sometimes it's really
good to invest in your 401K.
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There are a couple of reasons why,
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but I'll not mentioned them right now,
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but I'll link an article down below
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showing you why you should
invest in your 401K.
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So we're gonna say that
we're gonna give about
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$100 towards our 401K
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and we're assuming that we
have a 50K pretax salary.
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In New York City, after taxes,
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that doesn't leave you with too much.
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After taxes, this will be what it is.
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We're gonna assume that we
don't have any side jobs,
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but if you have any side jobs,
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this is where you wanna put that money.
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So next step is to look at your savings.
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Notice that we put our $100 pretax,
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but to make this calculation
work a little bit smoother,
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I did not add the 401K
to our total savings.
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So when you're saving
money, you wanna make sure
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that you already have a
fully-funded emergency fund.
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If you don't have a
fully-funded emergency fund,
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this is something that you
definitely wanna work on
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immediately.
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So for your emergency fund,
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you wanna have between three to six months
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of your expenses.
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Right now, we're gonna
try to just get to the 20%
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and we're gonna say that
we're gonna put about $600
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every single month to,
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or you could just say
$500 every single month
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towards our emergency fund.
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And if you have any
long-term saving goals,
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like let's say you wanna buy a house,
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we can just say that
we'll put about like $100
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towards this too.
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Great.
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So now, the next step is to
work with your fixed expenses.
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As you look through the spreadsheet,
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the fixed expenses are things
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that are basically your bills every month.
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These are items that don't really change.
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Every single month, you kind of owe this.
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And this is probably your most,
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the most pressing obligation that you have
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is to pay your bills.
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So these are the fixed expenses.
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This money kind of like
automatically leaves your account
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every month.
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You have to pay it.
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And in our budget column,
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you can see that we're
putting rent in here,
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utilities, transportation,
your student loans,
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cell phone bills, and
the remaining in here.
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So let's go ahead and plug that in.
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I'm gonna use real
numbers in New York City.
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So when I was making
about this amount of money
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when I first started my
first job in New York City,
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my rent was close to a $1,000.
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So utilities, we can say $70.
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Transportation, we can
say that's about $127.
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Student loans, we can put that about $200.
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Your cell phone bill, we
can say it's about $70.
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Apple Music is about 4.99.
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Netflix and Hulu,
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I actually don't pay for
either of these services,
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so I don't know how much they cost.
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So I'm gonna say that they cost about $20.
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If you have any credit card debt,
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this is something that you
really wanna work on paying off.
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So instead of making this
long-term saving goals
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for the house,
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you can say that we want
it to go towards our debt.
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But right now, for the time being,
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we just wanna contribute the minimum.
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So we can say it's about $25.
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As you can see, once we've
covered our fixed expenses
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and we've paid ourselves first,
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now we have about $800 left over
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to do whatever we wanna do.
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So that's a lot of fund.
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You have $800 every
single month to play with.
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You wanna put all these numbers
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in your flexible expenses category,
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which should be about 30% of your budget.
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So for flexible expenses,
these kind of change,
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they're not really fixed,
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and you have a lot of control
over this part of your budget.
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So let's say if you're in New York City,
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laundry costs about $10 a month for me.
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Groceries, you can spend about 250.
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Let's say $250 for like a single person
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if you're cooking for
yourself every single day.
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Your gym, let's say it's about $50.
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And now, we have about
$537 and one set left over.
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That means we have about
$500 every single month
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that we can allocate to
whatever we wanna allocate to.
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So we know that one of our big goals
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is to get to Paris in nine months, right?
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We wanna be able to have $2,000 saved up
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so we can go to Paris.
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What we need to do is that
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we need to do a little
bit of math to figure out
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how much we need to put,
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set aside every single
one to reach this goal.
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So that number,
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I did a little bit of
calculations ahead of time.
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That number is about $223.
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So I can say this is for Paris.
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Okay, great.
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So now, let's look again
at the leftover category.
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We have $314 every single month
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that we can decide what we wanna do with.
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If you wanna add some money to donations,
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we can make that the $14 and 1 cents.
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I mean, everyone donates whatever
amount they wanna donate.
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This is a category that kind of,
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you need to align with your
beliefs and your goals.
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Another thing is we got,
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let's go ahead and add
the remaining stuff,
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which is fun with friends
and then your self-care.
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We have about $300 left over.
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Let's say we give about
$100 to fun with friends
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and about $200 every
single month for self-care.
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So now, we've kind of figured
out our entire budget.
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We have nothing left over.
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So we've given every single dollar a job.
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Some of the dollars we saved up,
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some of the dollars we used
to cover our fixed expenses,
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and the remaining dollars,
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we get to decide what we wanna do.
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The six step is decide if
this budget is helping you
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get to your goals.
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You want your budget to fit your goals.
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You want your budget to be
something that makes you happy
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and is kind of satisfying
you in all aspects
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of your financial life.
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So if you're looking
at certain numbers here
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and you're very unhappy with the number,
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let's say your credit card debt
is causing a lot of anxiety,
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so you wanna put money towards that.
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Then you can kind of bump up
your savings to fit that goal.
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Let's say you believe
that $200 is not enough
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for your self care,
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like if you have like hair
that you wanna get done,
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your nails you wanna get
done and beauty expenses,
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you don't think it's enough money,
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then what you wanna do is
you wanna take the money
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out of another category and
put it towards this category.
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Personally, I usually try to
reduce my groceries budget
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because for me,
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sometimes putting money
towards other things makes,
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brings me more happiness.
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So you kind of want to
make sure that your budget
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is aligning with your goals.
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And if you're anything like me,
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whenever I see my budget, I'm always like,
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"Wow, I just need to make more money."
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So maybe you might look at your budget
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and ultimately decide to put more,
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just find a way to increase your income
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so you can put more money
towards your different goals.
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Another thing to make sure
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when you're looking at your budget is,
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are you living below your means?
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If this leftover number is negative
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or at least in Google Docs
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it will just be a bracket around it.
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So like, let's say if
we increase this to $50,
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you're living above your means.
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This is something that you
don't wanna do to your budget.
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The number one goal of your budget
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is to allow you to live below your means
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and allow you to plan your
money so that it works for you.
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So if you're living above your means,
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you have to figure out what can you cut
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to allow yourself to live below your means
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or how much money can you make extra
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to fit this budget to fit the
means that you have currently
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or the living standards
that you have currently.
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Now, the seventh step and
something I find really fun
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is to eventually just track
your money every single month.
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So what you wanna do
is every single month,
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you wanna look at what you
say you wanted to spend
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to what you actually spent.
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And you have a lot of different software
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that can help you do this.
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There's like Personal Capital,
there's Mint, there's YNAB.
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I actually use YNAB.
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That's my favorite one now.
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So is Personal Capital,
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but YNAB is definitely my favorite one.
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And you can kind of look to see,
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are you overspending in
any of this category?
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Are you sticking to your plan
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that you said you wanted to do?
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Yeah, so that's just like the final step
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of how to create a budget
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is to just go back every single month
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and make sure that you're
on track with your plan.
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And before you know it,
budgeting will be so much fun
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and you'll be having a
great time doing this
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because your money will have a plan
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and you'll be excited to meet
reaching all of your goals by
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because you've created
a plan for your money.
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Thank you guys so much
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for sticking through
this part of the video.
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If this was something you enjoyed,
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please make sure to give this
a thumbs up and subscribe
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if you want to see more content like this.
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Thanks for watching and
I'll see you guys next time.
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(ambient music)
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