Planning a budget might not be in your top five fun things to do this summer but budgeting is necessary and will help you today and in your future.
Here is the deal, if you've never set a budget for yourself don't worry. It's all a matter of keeping track of how much money is coming in and how much is going out.
The Living Young & Free Field Guide has a simple and easy step-by-step method to get you on track to budgeting for first timers. The method is called Shoebox Budgeting. The budget consists of setting up two boxes, labeled "IN" and one labeled "OUT" to represent money earned and money spent, respectively.
To start your budget, you need to be aware of how much you are spending versus how much you are making. Below, I have outlined the simple method to get your budget on track.
Step 1: Track your money
- Use two shoe boxes: label one “OUT” for money you spend and one labeled “IN” for the money you earn.
- Next, track every dollar that you spend or save by saving pay stubs, receipts, and ATM receipts.
- For one month, put your receipts into their respective boxes at the end of each day.
Step 2: Sort your receipts
- At the end of the month, sort your receipts in the “OUT” box into categories.
- Categories might include gas, groceries, dining out, entertainment, bills, rent, etc.
- Remember this is your budget, so choose categories that make sense to you. If you have animals, pet food would be an additional category.
Step 3: Add it up
- Now add your expenses for the month.
- You can download the Shoebox Budget worksheet to add up your expenses OR create a spreadsheet on your computer to do the calculations for you!
- Next, calculate your earnings for the month.
- These two figures will tell you where you stand financially. (Hint: The goal is for your earnings to be higher than your expenses!)
Step 4: Reduce spending
- Look through your categories and see where you could cut back some of your spending.
- Start with the areas that will be most manageable for you. For example, maybe you need the same amount for gas every month but you can cut back on dining out and nights out to the bar.
Step 5: Set your budget
- Write out your budget categories and new category goals for the next month.
- Choose some saving ideas you identified (like not dining out every week) and stick with them. Using the Shoebox Budget worksheet, write them in the middle column.
- Estimate how much those ideas could save you in each category, and subtract it from the total in that category.
- Also, add an extra category called “Flexible.” This will be for emergency or unexpected expenses.
Step 6: Repeat!
- Continue saving statements and receipts and filling those shoeboxes every day.
- You may find it easier to budget per week, or per pay period. Just live your life as you normally would, but incorporate the changes above to get you tracking your spending habits.
- At the end of the month, check in with your budget. You might be a little under in some categories and a little over in others. Just make sure you know why!