My Easy 1-2-3 Budgeting Technique
Watch my full YouTube video on this topic here!
Have you tried budgeting before, but it just isn’t working for you? Figuring out how much money is coming into and going out of your accounts can get overwhelming, especially with the cost of living crisis we’re dealing with right now thanks to inflation. Try my easy 1-2-3 budgeting technique to get control back over your money!
Here's how it works:
1. Save & invest first. Decide how much to put towards savings and investments each month. It’s really important to put money aside for your future self before you spend on today’s needs and wants. If you make a habit of doing this the minute your paycheck comes in, it will build a nice nest egg for emergencies and retirement over time! You can even automate your savings and investments deposits if that makes it easier. If you own a home, make sure you have a dedicated home repairs savings account set up to cover those surprise expenses. Same goes for a fund for unexpected medical expenses, and at least a 3-month (preferably 6-month) account for big emergencies such as a job loss. Look for high-yield savings accounts to help your emergency funds keep up with inflation.
2. Put money towards bills and fixed expenses next. Set up a checking account that’s specifically for paying your rent/mortgage, utility bills, etc. Add up how much your monthly bills are running you, and put that in your bills account every month. You can average out things like utility bills if they vary depending on the time of year. Every time you get paid, put the money you need to into your bills account, and you won’t make the mistake of spending your rent money on a shopping spree ever again! Also make sure to set up what’s called a “Reserve Account” (I use a checking account for this since I know I’ll be withdrawing from it often) where you deposit money every month to cover unexpected expenses like car repairs, vet bills, and so on.
3. Divide up what’s left to pay for groceries, gas, household expenses and fun money. The cost of things like food and your household supplies will come first, and then from what’s left give yourself, your spouse/partner, and any other family members a dedicated account they can spend from, no questions asked! Fun money accounts are possibly the most important category in your budget, since without some money you can spend on whatever you want to budgeting can start to feel way too restrictive.
The self-discipline it takes to set up and stick to a budget is worth the effort, since as you build good budgeting habits month after month you’ll stop running up credit card balances! You’ll also gain a lot of self-confidence as you practice managing the money coming into and out of your accounts each month. You can also watch my budgeting playlist on YouTube for more helpful tips!