(What you’ve just done? It’s called zero-based budgeting, and it’s about to change your life.)ĭon’t make plans for dollars that you don’t have yet, like future paychecks…I know that seems hard but, trust me, it’s important. You can see how much is left after transactions in each category in “Available to Spend.” That’s the goal! In YNAB, you’d move money from your “Ready to Assign” section to the “Assigned” column. Keep assigning money from your bank account to your categories until there’s none left. It’s best to assign your dollars to categories based on due date and/or urgency.Īsk yourself how much money you have and what it needs to do before your next paycheck. That’s how much money you have to distribute to each of these categories right now. Step Two: How Much Do You Have? “How much money do I have and what does it need to do before my next paycheck?” But you’re missing out on the best and most effective way of managing your personal finances if you stop there! Keep going because this is where it gets good. Now, before we get to step two, I want to call out that perhaps when you’ve previously thought of “budgeting” or “making a budget” that you’re done after step one. Your budget (and your spending habits) should be a reflection of what matters to you. You’ll have a little more wiggle room when it comes to fun expenses and savings goals, but use those numbers to create a little accountability in your life-is your priority bottomless mimosas at brunch every Sunday or a three month emergency fund? There’s no wrong answer (regardless of what your dad would think). For non-monthly or variable expenses, like Christmas gifts, auto registration, car insurance, or annual subscriptions, divide your estimate by the number of months it takes for that cost to recur so that you can contribute manageable chunks on a monthly basis instead of choking on the whole cost when it comes up. Monthly expenses like rent, cell phone bill, electricity, student loan payments, health insurance, etc. Your budget plan is going to evolve as you journey down the path of financial enlightenment. Don’t get bogged down in this as you’re getting set up the first time-guessing is just fine. Step One: How Much Do You Need?įirst, you need to come up with an estimate of how much each of those expenses will cost. Here’s an example of YNAB’s fully customizable budget template. Once you’ve listed your different category groups and the categories that fall under each one, create two additional columns: label one column “Assigned” and the other “Available.” The rest of this process will be easier to set up and maintain on a budget spreadsheet, or even easier, in YNAB. Potential expenses to include as categories when you create a budget template. It can be a budget app (ahem, YNAB), Excel spreadsheet or Google Sheets, or…a brand new notebook…whatever works best for you. Then add a category at the bottom for “Stuff I forgot to budget for” because let’s be realistic, there’s always stuff like that. Choose your budgeting tool of choice.
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