Want to create a monthly budget but don’t know where to start? Hopefully I can give you some ideas by recounting how I came up with my monthly budget.
My graduate school stipend is the first time in my life I’ve had a consistent monthly income that I have to live off of. I found myself in a situation where I needed a monthly budget but didn’t know how to come up with one.
I only officially started sticking to a monthly budget in my third year of graduate school. I lived with one other person my first two years and my rent was therefore quite affordable and I didn’t really have to keep track of my expenses. However, I decided to live on my own starting my third year and with the increase in rent, I knew I had to keep better track of my expenses, especially if I wanted to consistently save every month so I decided to set up a budget.
Since I pretty much exclusively use credit cards to buy things, I took a look at what I was spending money on and came up with the following spending categories (with examples). Categories can be combined or removed based on your lifestyle:
- Electricity, internet (+ cable + phone), heat, gas, parking, etc.
- Health insurance, car insurance, renter’s insurance, phone/data plan, mortgage, student loans, etc.
- Fixed monthly expenses/subscriptions
- Netflix, Spotify + Hulu (student rate includes Hulu), Amazon Prime (student rate; technically a lump sum payment, but I just break the cost down per month)
- Eating/going out
- Take out, food with friends, movies, happy hour, etc.
- My lab is dangerously close to an Einstein Bagel Bros and the hospital cafeteria so I tend to find myself there probably more often than my fellow graduate students
- House/kitchen stuff
- Cleaning supplies, toilet paper/paper towels, small appliances, etc.
- Clothing/shoes, books, concert tickets, etc.
I have never budgeted before and didn’t know how much to allow myself to spend per category, so before actually setting specific amounts, I spent a month writing down my expenses (using the Google Sheets app on my phone) to figure out how much I usually spent per category. Alternatively, if you’re primarily a credit card user, you could also go through your credit card bills from the previous month and figure out how much you spent per category. By tracking my expenses for a month, I got an idea of what a reasonable budget amount per category would be rather than blindly assigning amounts. For example, setting a $50 grocery monthly budget is likely unfeasible when I spend closer to $120 a month. If my target grocery monthly budget is $100, I’d begin by aiming for $110 the next month and then $100 the following month. It’s definitely harder to stick to a budget if you’re suddenly spending a lot less than you’re used to and it can become extremely discouraging when you see yourself going over budget month after month. Taking it slow will probably increase your success rate.
Additionally, after spending a month just logging my expenses, I calculated what percent of my stipend I was saving a month and increased it a little for the following month until I got it to my target of saving 20% of my stipend a month.
This budgeting scheme doesn’t take into account large life-altering events like moving or buying a house. The first month or two after moving to a new place probably isn’t the best time to start budgeting because you’ll likely be making large purchases (e.g., couch, TV, appliances, etc.). But after you’ve settled in and your spending stabilizes, sticking to a budget will be less complicated.
Lastly, after setting your budget, keeping track of your spending and sticking to your budget is another task in itself. Credit cards make it easy to use Mint which automatically calculates how much you’ve spent in certain categories. However, I set up a spreadsheet and manually enter the amounts I spend via the Google Sheets app (Android, iOS) on my phone. I find this keeps me more accountable to my budget, and since I’m always on my phone, it wasn’t too difficult to make using it a habit.
I ended up sticking to a budget for about a year. Towards those last few months, I found myself easily meeting or even going under my budget and have since loosened the reins a little. I’ve essentially trained myself to spend like I’m on a budget without actually needing to keep track of my expenses (kind of like training wheels and riding a bike).
I hope this post helps some of you get started with budgeting. Like with most things, it takes time, so don’t give up!