Help a n00b create a personal budget!
June 20, 2012 10:24 AM Subscribe
Novice/don't know what the hell I'm doing Filter: Moving away from home for the first time and need to create a budget! Any tips/help?
I am moving out of my parents' house and will not be financed by them for the first time. I have lived on my own for college and a year of volunteering overseas, but both were experiences where I wasn't responsible for my housing or bills.
My fiancé and I are currently searching for a place to live together, and I'd like some help in creating an accurate, reasonable budget. We will have to take into account rent, utilities/cable, security deposits, groceries, fuel, car insurance, health insurance, mobile fees, etc. I own my car and am not making any car payments, nor do I have any loan payments. What am I missing? Any tips?
I am moving out of my parents' house and will not be financed by them for the first time. I have lived on my own for college and a year of volunteering overseas, but both were experiences where I wasn't responsible for my housing or bills.
My fiancé and I are currently searching for a place to live together, and I'd like some help in creating an accurate, reasonable budget. We will have to take into account rent, utilities/cable, security deposits, groceries, fuel, car insurance, health insurance, mobile fees, etc. I own my car and am not making any car payments, nor do I have any loan payments. What am I missing? Any tips?
Highly, highly, highly recommend YNAB (You Need A Budget). [But do keep in mind you can essentially create the same thing in Excel, but I like working in the program and the iPhone app]
I also recommend the YNAB webinars.
posted by xicana63 at 10:35 AM on June 20, 2012 [1 favorite]
I also recommend the YNAB webinars.
posted by xicana63 at 10:35 AM on June 20, 2012 [1 favorite]
I found a budget percentage calculator online and then played around with that to create a basic budget at first. Then, as I tracked actual spending, I moved money around to different categories. The most helpful tip I can give you is to make sure you are giving yourself fun money if you have the room for it.
posted by Nimmie Amee at 10:35 AM on June 20, 2012
posted by Nimmie Amee at 10:35 AM on June 20, 2012
It sounds like you have thought of the basics.
Expenses (mostly one-offs) I have sort of wished I'd taken into account when moving in the past:
- Basic tools / home repair supplies (can you scrounge any off your parents? My dad was pretty happy to help me put together a toolbox when I first moved out)
- Cleaning stuff, a broom, towels, laundry detergent, a cheap vacuum, trash bags.
- Furnishings - do you have furniture to sit on? Shelves for books? Lamps? These things don't have to be expensive and can be accumulated over time, but not having them gets kind of old.
- Silverware, basic cookware, a dish drain, etc.
posted by brennen at 10:38 AM on June 20, 2012 [1 favorite]
Expenses (mostly one-offs) I have sort of wished I'd taken into account when moving in the past:
- Basic tools / home repair supplies (can you scrounge any off your parents? My dad was pretty happy to help me put together a toolbox when I first moved out)
- Cleaning stuff, a broom, towels, laundry detergent, a cheap vacuum, trash bags.
- Furnishings - do you have furniture to sit on? Shelves for books? Lamps? These things don't have to be expensive and can be accumulated over time, but not having them gets kind of old.
- Silverware, basic cookware, a dish drain, etc.
posted by brennen at 10:38 AM on June 20, 2012 [1 favorite]
I found tracking my spending to be helpful in creating a budget. In addition to housing & utility bills, I figured out how much I spent per month, and added them in. Grocery bills, etc.
For utility bills, once I had a year of data, I added it together and then divided by number of paychecks, which gave me the amount to put aside out of each paycheck. You could of course do this by season, as well, since the various utilities fluctuate. I find it easier to divide things per paycheck, and just put the money aside, but YMMV. It's possible that you can ask what the average utility bill for a place is, if the landlord has that information.
Do you normally pay things with checks/autodraft/debit? If so, you can look back through your bank statements, which would help you find non-monthly expenses. I also like to budget for gifts (birthdays, etc) when possible.
Don't forget the car tag yearly fee. I agree with KathrynT - having some leeway in your budget is a good idea, and there will be unexpected expenses.
An emergency fund has also come in really handy for me - I started out (years ago) putting aside $20/paycheck, and kept saving. It's come in handy for car repairs, emergency vet bills, etc.
posted by needlegrrl at 10:41 AM on June 20, 2012
For utility bills, once I had a year of data, I added it together and then divided by number of paychecks, which gave me the amount to put aside out of each paycheck. You could of course do this by season, as well, since the various utilities fluctuate. I find it easier to divide things per paycheck, and just put the money aside, but YMMV. It's possible that you can ask what the average utility bill for a place is, if the landlord has that information.
Do you normally pay things with checks/autodraft/debit? If so, you can look back through your bank statements, which would help you find non-monthly expenses. I also like to budget for gifts (birthdays, etc) when possible.
Don't forget the car tag yearly fee. I agree with KathrynT - having some leeway in your budget is a good idea, and there will be unexpected expenses.
An emergency fund has also come in really handy for me - I started out (years ago) putting aside $20/paycheck, and kept saving. It's come in handy for car repairs, emergency vet bills, etc.
posted by needlegrrl at 10:41 AM on June 20, 2012
Best answer: This was a bit oddball the first time I considered it as well. My OCD wanted to account for things that couldn't be accounted for because they're simply not regular/predictable.
Here's what worked for me: Don't think of the budget as figuring out where to put your incoming money. Think of it as where the money you have incoming must go. Does that make sense?
Basically by approaching it on the demand side of things I was stressing myself out trying to accommodate for things properly. Saying, "How can I best handle these expenses?" just didn't work for me.
By taking the supply side income, which is likely fixed week-to-week based upon your job, and simply applying the known outgoing or repeatable expenses (food, rent, gas, insurance, etc) to that amount you're left with a remainder dollar amount, which *must* be positive. Otherwise start over and cut costs. If your income isn't damn near fixed or the same from pay period to payperiod (freelancer, self employed, whatever) then you have some tricky assumptions and math to do, but so 'tis life.
Now that the remainder number is positive, you can take it and really start deciding where to put it. Grab an estimate for clothes for the year, divide it by 12, set that amount aside for clothes each month. If you don't spend it, roll it over into the next month. Do the same for other 'semi-necessary' items like shoes, tires, oil changes, whatever you can think of.
Figure out how much you'd like to save based upon your plans in X years. Want to live like a monk in a rented apartment forever? Fine, save virtually nothing. Want to retire in 10 years and move to Florida and experience virtually no downgrade in lifestyle? Save it all, you are now done with the budget. Do not continue.
Ok, not saving it all? Want to go on vacation in 6 months? Fund it on a per month basis and set that amount aside. Don't touch it or you don't get to go on vacation.
Again, since we're not assuming that you're saving everything, now you can figure out the 'fun' allocation for the month. That money can do whatever you want it to. Candy, soda, comic books, whatever, it's your allowance and nobody can tell you what to do with it. You should feel ZERO guilt about spending this money how you want to spend it. Self-guilt not allowed. Ok, you can (read: maybe should) feel guilty in a "I'm living in a first world country, look how lucky I am" kind of way, but that's it.
Personally, I take any money in the fun-money account not spent at the end of the month and put it into savings, roll over could be possible but it really does encourage more impulse spending than I like.
Try the above, in order, and see if that helps you out. Excel is your friend. Credit cards help us arrange/categorize purchases/payments but that might be a bit much for you at this point.
posted by RolandOfEld at 10:52 AM on June 20, 2012 [3 favorites]
Here's what worked for me: Don't think of the budget as figuring out where to put your incoming money. Think of it as where the money you have incoming must go. Does that make sense?
Basically by approaching it on the demand side of things I was stressing myself out trying to accommodate for things properly. Saying, "How can I best handle these expenses?" just didn't work for me.
By taking the supply side income, which is likely fixed week-to-week based upon your job, and simply applying the known outgoing or repeatable expenses (food, rent, gas, insurance, etc) to that amount you're left with a remainder dollar amount, which *must* be positive. Otherwise start over and cut costs. If your income isn't damn near fixed or the same from pay period to payperiod (freelancer, self employed, whatever) then you have some tricky assumptions and math to do, but so 'tis life.
Now that the remainder number is positive, you can take it and really start deciding where to put it. Grab an estimate for clothes for the year, divide it by 12, set that amount aside for clothes each month. If you don't spend it, roll it over into the next month. Do the same for other 'semi-necessary' items like shoes, tires, oil changes, whatever you can think of.
Figure out how much you'd like to save based upon your plans in X years. Want to live like a monk in a rented apartment forever? Fine, save virtually nothing. Want to retire in 10 years and move to Florida and experience virtually no downgrade in lifestyle? Save it all, you are now done with the budget. Do not continue.
Ok, not saving it all? Want to go on vacation in 6 months? Fund it on a per month basis and set that amount aside. Don't touch it or you don't get to go on vacation.
Again, since we're not assuming that you're saving everything, now you can figure out the 'fun' allocation for the month. That money can do whatever you want it to. Candy, soda, comic books, whatever, it's your allowance and nobody can tell you what to do with it. You should feel ZERO guilt about spending this money how you want to spend it. Self-guilt not allowed. Ok, you can (read: maybe should) feel guilty in a "I'm living in a first world country, look how lucky I am" kind of way, but that's it.
Personally, I take any money in the fun-money account not spent at the end of the month and put it into savings, roll over could be possible but it really does encourage more impulse spending than I like.
Try the above, in order, and see if that helps you out. Excel is your friend. Credit cards help us arrange/categorize purchases/payments but that might be a bit much for you at this point.
posted by RolandOfEld at 10:52 AM on June 20, 2012 [3 favorites]
I forgot, throw in funding an emergency fund in there as well. Whatever you feel comfortable with as far as amount. Personally, I'd not feel good until I had at least a few thousand bucks in a "Oh shit the transmission just went out in the car, now what are we going to do?" account. That'd make me want to put as much as possible in there as quickly as possible. Some will debate if you should place this funding step above or below retirement planning step but personally I'd put it above the retirement step and not go to the movies until I funded it fully. Then you can ignore it until you revisit the whole budget-thing in a few months/year as your life requires.
posted by RolandOfEld at 10:58 AM on June 20, 2012 [1 favorite]
posted by RolandOfEld at 10:58 AM on June 20, 2012 [1 favorite]
I would hugely, hugely recommend Ramit Sethi's I Will Teach You To Be Rich. Don't be fooled by the cringe-worthy title, it's an awesome primer on conscious spending. He also has great advice about credit cards, banking, investing, etc, and from the perspective of someone who is also just starting out, it was extremely helpful. Explained some stuff my dad had been trying to teach me for years about financial management.
posted by tooloudinhere at 11:11 AM on June 20, 2012
posted by tooloudinhere at 11:11 AM on June 20, 2012
I just want to say keep it simple! I find I don't really need all that many "categories" - like, money that I spend on clothes is almost entirely discretionary (I could probably dress adequately professionally for around $300 a year), as is the money I spend on home furnishings (I really have everything I need), as is the money I spend on entertainment, alcohol, vacation, etc. So that just all gets lumped into "shopping" or, in the words of the lovely, simple Balanced Money Formula, "wants."
I think the key thing to setting a budget is paying a lot of attention at the beginning to the things that are hard to change: your rent and utilities payments, your car expenses, your student loan payments, etc., and working the rest of your budget around that.
Per the Balanced Money Formula I shoot for spending 50% of my income on "needs," 30% on "wants," and saving the other 20% (I actually end up saving either more than 20% or much less, depending on whether I count my employer contribution to my retirement account as savings or just pretend like it doesn't exist).
Oh, and I roll over any excess fun-money into my "vacation" account - that way it's saved but it's still fun.
posted by mskyle at 11:26 AM on June 20, 2012
I think the key thing to setting a budget is paying a lot of attention at the beginning to the things that are hard to change: your rent and utilities payments, your car expenses, your student loan payments, etc., and working the rest of your budget around that.
Per the Balanced Money Formula I shoot for spending 50% of my income on "needs," 30% on "wants," and saving the other 20% (I actually end up saving either more than 20% or much less, depending on whether I count my employer contribution to my retirement account as savings or just pretend like it doesn't exist).
Oh, and I roll over any excess fun-money into my "vacation" account - that way it's saved but it's still fun.
posted by mskyle at 11:26 AM on June 20, 2012
One thing I recommend is not spending more than 25% of your gross income, combined for housing. The less you spend there, the more you have to spend elsewhere.
Remember to reserve monthly for annual expenses like Christmas, car registration, etc. Things that are always going to cost money, but that hit at one time in the year.
posted by Ruthless Bunny at 12:36 PM on June 20, 2012
Remember to reserve monthly for annual expenses like Christmas, car registration, etc. Things that are always going to cost money, but that hit at one time in the year.
posted by Ruthless Bunny at 12:36 PM on June 20, 2012
This thread is closed to new comments.
posted by KathrynT at 10:31 AM on June 20, 2012 [1 favorite]