![]() Meal planning can help you get the most out of your food budget.) (FYI, start with the restaurant line! Food is where we Americans tend to overspend the most. That can mean lowering your planned spending amounts where you’re able, or it can mean cutting spending. Get out your metaphorical hedge clippers, and trim that budget. This means you’re spending more than you make, and that just won’t work. Now, let’s talk about what to do if you subtract your planned expenses and end up with a negative number. (Aka how to win with money.) They are the seven money goals that will take you from where you are to where you want to be. The 7 Baby Steps are the proven, guided path to save money, pay off debt, and build wealth. Got money left over? First, throw some confetti and do a celebration dance. Practically no one gets this right the first time. If you don’t hit zero at your first pass, welcome to the majority! Yep, that’s right. When you subtract all those expenses from your income, it should equal zero. Subtract your expenses from your income to equal zero. That way, anything that pops up unexpectedly isn’t a problem-it’s in the budget.ģ. ![]() Month-specific expenses (Any holidays, celebrations or semiannual expenses due this month?)ĭon’t forget to give yourself a miscellaneous category too so you have a little extra cushion in your spending.Extras (Here’s the fun part: entertainment, fun money, restaurants, etc.).Other essentials (We’re talking about insurance, debt, childcare, etc.).The Four Walls (These are the top bills to cover: food, utilities, shelter and transportation.).Savings (This depends on your Baby Step, which we’ll explain later.).Giving (This should be 10% of your income.).Think of everything you spend money on during the month. You know what’s coming in-now plan for what’s going out. If you want to start on paper to get all these numbers down, and then switch over to EveryDollar, that’s cool too. Write it all down and add it up! That’s your total monthly income, aka what you’ve got to work with this month. What counts as income? Your regular paychecks and anything extra you plan to bring in during the month (think side hustles or child support). ![]() Because the math that’s coming up is way easier with EveryDollar.) You can do this the old-fashioned way with a sheet of paper, or you can use our free budgeting app, EveryDollar. You can also check out these budget percentages and averages. They come in handy when you’re wondering how much you normally make or spend on stuff. So, if this part of your budget is below 20%, look to reduce your spending on needs and wants.Before you start making your zero-based budget, log in to your bank account or grab those bank statements out of your drawer. We recommend building up a small emergency fund - typically, $1,000 is enough - and then use the savings portion of your budget to pay down your debt. Since the interest rate on credit cards is so high, it doesn’t make financial sense to have money sitting in savings while also paying high interest on credit card debt. Some special instructions for anyone carrying credit card debt: if you currently have high-interest rate debt, you’ll want to put this money towards paying off your debt rather than building up your savings. Otherwise, you may want to put this money away for retirement. If you don’t have an emergency fund, you’ll want to save enough money to cover 3-6 months of expenses. How exactly you use this portion of your budget is up to you. The goal isn’t just to survive the month it’s also to make life easier for future you by building wealth and long-term financial security. It’s easy to forget to think long-term when putting together a budget. This includes things like movie tickets, going to restaurants, or a new outfit. ![]() Your “wants” are your fun money for right now. Can you trade your car for something more affordable, get a better rate on your insurance? Make more meals at home? Wants: 30% of Your Income Now, obviously relocating isn’t the right option for everyone, but don’t be scared to think outside the box to find ways to save. The less your needs cost, the more money you have to put towards savings or to spend on your wants.Ī few years ago, my family made a big move from living in San Francisco, where the cost of living was really high, to relocating to another state where the cost of living worked much better for our budget. If you’re spending more than 50% on necessities, narrow in on where your biggest expenses are and figure out ways to reduce them. You may need to either re-evaluate your cost of living or look for ways to increase your income so that you can support your current living situation. If your needs cost more than 50% of your income, it becomes really difficult to sustainably save money.
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