Personal Finance: Introduction to Budgeting

Tuesday, April 30, 2019


PLUS: Download our personal budgeting spreadsheet below!

So we're starting a Personal Finance series!
Personal finance/investing can be super f*cking complicated if you don't come from a family/background that regularly discusses it or with much financial literacy -- which is super common. I graduated from an undergraduate business school and had a major in Economics, and I still find the topic very dry and complex (which is probably why I couldn't do Finance/investment banking!)

For those of us who aren't particularly passionate about investment banking but very, very passionate about returns on investments and what they can afford us (shoes! books! donations to coalitions and non-profit organizations of our choice!), so we're compiling the quick and dirty finance lessons we wish we'd learned in high school. Obligatory heads up that the "personal" is "personal finance" is very literal, and your strategy will shift hugely depending on your priorities/salary/etc.

Topic 1: Introduction to Budgeting
Here's a cute first-date question: what does your budget breakdown look like and how much of your discretionary income do you allocate to self improvement? 
I don't think budgeting is synonymous with frugality; you could budget very closely and still have zero savings because you've ~consciously allocated~ the majority of your discretionary income to sample sales. The point is, even if you're very comfortable spending the majority of your money (or if you have no choice because cosmopolitan costs of living are ridiculous), you shouldn't be surprised by where your money is going each month.
I like to do all of my budgeting in Google Sheets because it's super accessible (as in, I can give it a quick peek on my work laptop, on my phone, etc.) so that I should never, ever have an excuse to accidentally overspend.
The basics of budgeting are (1) fixed sum or percentage-based allocations to different categories of expenditures, (2) a table of dated entries crediting and debiting each category and method of payment.
In fact, I've put one together and shared it below for you to use.
It's pretty simple (and please don't over-analyze the sample entries; I made them up, including the income). You divide your income into percentage-based allocations (ex. 20% of my paycheck goes towards my rent.) The worksheet automatically populates the dollar amount of your budget based on the percentage inputs.
Your entries require a bit more grunt work; track your expenditures (either by keeping your receipts or through an app), then categorize & subcategorize them to deduct from your budgeted allocation. For example, on March 13, I spent $34.00 on a baby shower gift from Nordstrom's. The workbook deducts $34.00 from the money I allocated for discretionary gifts.

The workbook also keeps track of your surplus (the money you estimated you'd spend but didn't) and rolls them into a running total for end-of-month savings. This is the number you want to maximize!

The workbook is also totally customizable, so you can play around with the categories, like adding student loan payments or changing the percentage allocated to rent.




Upcoming topics -- stay tuned:
Side Hustles & Extra Income
Investing
Planning for Retirement
Personal Finance Apps
Habits for Financial Health

Love always,
LC

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