Updated: Jul 11, 2022
Today, I felt compelled to share more with you all about Financial Planning, specifically budgeting. Now, while I know this isn’t the most exciting Cali Creates topic, I felt it was important to share the knowledge I’ve learned in hopes of helping those who may find this subject equally intimidating.
I’ve recently made financial planning a much bigger part of my life in the past few years. Before that, I was just mindlessly spending and praying there was money in my account whenever I checked the balance. What a mess!
That being said, my goal is to share some basic budgeting tips for beginners so that you can feel confident to make some financial plans and adjustments for your life. Trust me, you will feel so much better when you have a deeper understanding of what financial goals you would like to achieve and how to execute it.
So let’s get started!
Have you ever been faced with these daunting questions?
Where is all my money going?
Did I really spend that much on Starbucks last year?!
How am I going to pay off my credit card?
Will I be able to afford rent this month?
How do people my age even have savings?
Will I ever pay off these student loans?
Any of those hit a nerve? Well, let me tell you, we have ALL been there. In fact, I would argue the majority of people have found these questions running through their mind at some point in their lives. This is especially true when you have no financial goals and plans in place.
To be honest, I felt cheated throughout most of my twenties thinking, “How do I know NOTHING about budgeting, finances, taxes, none of it?!”
Sure, I’m most likely to blame for some of that because I am a Marketing major, so yes, I am sure some of this was discussed in my Finance courses. However, none of these topics ever related to me in a way I understood. It just never “clicked.”
Cue many moons later and thousands of dollars on my credit card, I found myself drowning in debt. I was so embarrassed, because I made good money. I should have had more money, but I had no financial plans or budgeting in place. I would spend money even when I didn’t have money.
Of course it always starts out small, you spend a little over your means here and there, but you always pay it off. But, then… Oh, wait, your credit card is offering a SPECIAL deal where if you spend $3,000 in a couple months, you’ll get tens of thousands of rewards points. So, you do it. You didn’t have the money, but you’ll pay it off. AND, you get the rewards! So, it’s worth it, right?
Well, the answer isn’t so simple. If you have the money to pay off the debt, yes this could be a great deal. However, in my opinion, it’s best to avoid falling for these “deals” when you don’t have the money to pay these debts back.
That’s my opinion because that’s exactly the trap I fell into many years ago. It can be tempting to use and borrow money that’s not yours, but you have to be able to manage that temptation.
The key words being, “NOT yours.” The money is not yours and does not belong to you. Therefore, you have to be able to manage the temptation of that credit line being there.
You also need financial plans and budgets that keep your spending in a manageable place. Trust me, you will feel so much better when you are managing your money versus your money managing you.
I’m not going to preach that credit cards are bad, because honestly I think having a credit card and being able to build your credit score is huge! You just need to make sure that you aren’t spending more than you have. I use my credit card every month for most of my expenses, but with my budget I always know I’ll have enough to pay it off in full each month. And, that is key.
So, where do we start?
We start with a Basic Budget. The reason budgeting is the first step is because you need to be aware of where the money is going before you can manage a financial plan.
Budgeting in my opinion is the “come to Jesus” moment with your finances. You see where all the money is going and then you decide if that’s working for you. You get to make tweaks and changes to better support your future financially.
And, of course I’m here to help! I’ve created for you a printable budget worksheet that I wish I had many years ago at the start of my career.
In the budget worksheet, I’ve broken it into two parts: the Monthly Budget Planner and the Annual Budget Planner. Each part works together to make your monthly budget plans. Often, I feel I forget about my annual subscriptions, insurances, and gift purchases when it comes to budgeting. So, I want to make sure we cover all our bases in these planners.
Time to get started!
Basic Budgeting for Beginners
Step One: Download the worksheets (All are printable!):
Monthly Budget Planner (Blank) and/or Monthly Budget Calculator (Same Budget planner, but with a form that automatically calculates totals)
I recommend the blank worksheet if you prefer to print and do things yourself. I love writing things out on paper, so that is why this option is available. The calculator is for those who would prefer the calculations to automatically total and calculate for them. You can also print this out once completed.
Annual Budget Planner (Blank) and/or Annual Budget Calculator (Same Budget planner, but with a form that automatically calculates totals)
The calculator version of this worksheet is a lifesaver! You just enter your annual payments and the monthly cost will auto populate for you. The total will also be calculated for you.
Step Two: It’s time to start calculating goals and get to a Zero-Based Budget.
How do I calculate a goal?
Well this is easy! Answer this question: What is something you need or want to do that requires a good bit of money you don’t currently have? I’ve detailed out a few goals that may be a helpful start:
Pay off Student Loans
Pay off Credit Cards
Save for a House
Create and Save Money in an Emergency Fund
What’s a Zero-Based Budget?
Glad you asked! It basically means when you’re calculating your budget, you have zero leftover money. (Meaning: Total Monthly Income = Total Expenses) Now, not ALL this money is an expense. For instance, let’s say you didn’t hit a zero-based budget, so you decide to allocate that leftover money to savings. That’s not necessarily an expense, but you are making sure all your money has places to go and is accounted for. The cool thing about allocating that extra money to a goal is that once you reach that goal, you can allocate that extra money elsewhere. When you have a budget, you’re never shocked by where your money is going and you also don’t miss it when you stay within your means.
Step Three: Create and Save Money in an Emergency Fund
If you don’t have a savings account already, open one! For a long time, I had one savings account that I put all my different types of savings in (Emergency Fund, Self-Employed Tax Money, House Fund, etc.) That got CONFUSING. So, I opened a completely separate account for my Emergency Fund. I think it’s important to do so because you can set boundaries for this specific account. (For example, I do not touch my emergency fund unless there is an ACTUAL emergency whether that be car-related, medical related, loss of job, etc.) It’s there for that reason, so I don’t touch it.
How much do you need?
I’d recommend saving 3-6 months total expenses in your Emergency Fund. So, take a look at your monthly budget planner and save at least 3 months worth of those expenses to get started. (Ex. Total Expenses=$2,000. So, save at least $6,000 in an Emergency Fund.)
Step Four: Once Emergency Fund is Fully Funded, allocate whatever money you were previously funding to the Emergency fund to your other financial goals.
Simply put, now that your emergency fund is fully funded, you can use that monthly contribution to a new financial goal. Remember, not all of our goals are the same. These are all personal to you. I have included my recommendations, but this is completely up to you. Below are some typical goals you can start allocating money to:
Become Debt Free!
Pay off Student Loans
Pay off Credit Cards
Save for a House / Pay off your Mortgage
Save enough money for a down payment on a house OR pay off your mortgage for your home.
Plan & Save for Retirement
This is so, so important. If you haven’t started saving for retirement yet, this is your wake-up call to start TODAY. Most companies offer contribution matching for a 401K, so definitely take advantage of that. If you are self-employed or your company doesn’t offer a 401K, you can also open a Traditional IRA, Sep IRA, or Roth IRA to start saving for retirement.
And, that’s it! It really is that simple to start investing in your future and planning out your financial goals. Hopefully this helped!
So, are you ready and excited to get your finances back into a better place?
I’m excited for you!
Until Next Time,