Listen up, kings and queens: Setting a budget is one of the most advantageous things your could do for yourself and all it takes is 5-10 minutes of concentration. If you want more riches in your royal coffers, then sit your ass down and lemme give you a quick lesson on how to #adult to make up for one of the many ways our archaic education system failed you. Do I have your attention? Good. Let's get started.
First: Take a piece of paper and divide it by two columns—monthly and annual.
DO SOME ACCOUNTING
For the following write under the monthly column first then multiply by 12 and write it under the annual column. Take account of everything you spend money on, it will be the first step on setting the budget. Everything. This includes:
Utilities
Groceries (this does not count going out to eat)
Monthly Payments/Subscriptions: (this includes anything that has a recurring payment structure and is automatically withdrawn from your account. Amazon shipments, Netflix, cable, internet, gym memberships, credit card bills etc.) You can use apps like [Mint] or [Truebill] to track subscriptions
Incidentals: Do you smoke? (You shouldn’t). This includes anything else that you regularly do that isn’t on a monthly cycle like a subscription. So cover charges, drinks, going out to eat, movies, girl nights, Saturdays are for the boys, strip clubs, shopping—whatever it is that you regularly spend money on.
Since these tend to be more irregular, consider an average expenditure. For example: If you know you regularly go out around 2-3 weekends per month (Friday and Saturday) and you spend around $100 per night, average that to around to $400 per month ($200 per weekend, $100 per night)
TALLY UP
Everything accounted for? Great. Your budget is coming together! Now add up the numbers in the monthly column and the annual column. The final number is your total monthly expenditure.
Focus on the monthly column for now and compare that to your monthly income (the number you wrote on the top left) Do you have money left over? Are you just making ends meet? Do you spend more than you make?
If you have money left over, that’s a great start. If you are making ends meet or spending more than you make, here’s where the next part comes in.
TRIM THE FAT
Trimming is one of the most essential parts of setting a budget. I bet you anything that there are things you can trim. Whether it is the new Apple phone, Balenciaga shoes, or even that new sweater or shirt you just had to get, there are things that you do not need. You don’t need new apple phones. You don’t need a new sweater, unless you legitimately have only one ratty old sweater your are trying to stretch. Here’s what you do need to do: Stop spending money you do not have to impress people who you do not like or know and who do nothing for you in return.
Seeing as you need a place to live (rent), need that place to be functional in order to live (utilities), and need food (groceries) you cannot cut these out.
Pro-tip: Be mindful when buying groceries. Always shop after you have eaten and not when you are hungry, you tend to overspend on food that way.
So let’s start with the incidentals and subscriptions. Look at every single line and ask yourself if you really need it. Don’t make excuses for yourself or why you otherwise want it. Do you need it to live? Yes or no? If it’s a no, make a note to cancel it or cut down on it. If it is a yes, then keep it.
Most of the items in the Incidentals column could and should be eliminated. Does your liver deserve a break? Yes, it does. Do your lungs need to stop fuming like a chimney? Yes, they do. That isn’t even finance—it’s health 101. You can definitely cut back on the nights out. Cover charges are legitimately like throwing money in a public toilet and flushing it.
So CUT 👏🏼 BACK 👏🏼 BITCH 👏🏼
Items in the subscriptions column should go on a per-need basis. I understand the importance of Netflix, but make sure that your romance with binge-watching Stranger Things leaves you room to watch it from a plane, too.
ELIMINATE DEBT
Before you can spend money freely and experience financial freedom, you need to eliminate debt—which is part of what a budget helps curb. This means catching up on your credit card bills and immediately stopping any expenditure on them. Make sure that you are paying a balance that covers the principal + the interest accrued every month. This one is non-negotiable.
Credit card debt was a bottomless pit I was deep in and was thankfully helped out of. If not watched carefully, it can spiral into financial ruin.
SET A GOAL AND SAVE, SAVE, SAVE
Financial freedom also requires goals and patience (a virtue I’ve been busting my ass to work on because mama didn’t raise a patient child). This is something I am still working on, but learn to curb your impulses. Setting a meaningful goal for yourself on where you would like to invest your money is incredibly worthwhile. Yes, traveling can be an investment. You finally getting that place you always wanted is an investment. Or getting that car you eyed for years. It becomes an investment when you’re not resorting to placing yourself in debt to get it immediately. When you work hard for it and plan for it.
If your goal is to travel, set a timeline for any one place you want to visit and manage your budget so that you’re constantly saving for it and are thus one step closer to getting there. I promise you it will taste so, so much sweeter when it finally happens.
Now go and enjoy financial freedom. You got this.
Wishing you dolla-dolla bills,
Dan
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