Hey y’all! As we approach the new year I want to talk with you for a little bit about financial goals and budgeting. First, shout out to everyone that reached their financial goals this year. Setting and actually achieving your goals is a huge accomplishment that takes a lot of discipline, planning and focus. You should be proud of yourself. Cheers to you!

To those of us that didn’t—we still gon’ cheers, but we cheersing to better days to come! How many of y’all know your future is brighter than your past?! Amen!

But in all seriousness, I personally met my saving and investing goals for the year but missed on two others. I didn’t achieve my monthly income goal. I also really wanted to establish another income stream for myself but fell short. Mostly due to lack of detailed planning and execution. I have actually always hit my saving and investing goals because of the way I budget. Since I’ve been successful at this, I want to start here. Let’s talk about how I create a budget that works for me.

When it comes to damn near all things, I value simplicity. Doing too much, or even the thought of having to do a lot, makes me anxious and unmotivated, so when it comes to handling my money I take a basic bitch approach.

 

This is my method for creating my budget:

  1. Determine my income – How much money I have coming in each month
  2. Calculate and pay my fixed expenses – Rent, utilities, cell phone, estimated gas, and food
  3. Consider savings, investing and tithes expenses
  4. Money left over is mine to spend how I want

 

Expenses

To get started, the #1 thing I would suggest you do is write down your income and fixed expenses each month. I keep a notebook that I’ve used for the past 5 years. It has the name of the company and amount for each bill that I pay every month. I pay all my bills on the last Sunday of each month, even if it’s not due until later in the coming month. For example, if I have bills due on December 3rd, 8th and 12th, I pay them all on the last Sunday in November. I find that paying all my bills at once gives me a true picture of the money I can actually spend in the month. It’s also just easier. If I pay them all at once it’s over and done with. I prefer paying manually over auto-payment because I don’t run the risk of forgetting about a bill, spending the money, then bloop! Comcast is trying to get their money and it ain’t in my account. Additionally, I can see the bill and catch any issues like them over charging me, and contact the company before the money comes out of my account. The only bills I have on auto-pay are my rent and the ones that charge a service fee if they aren’t automated, which are my car insurance and water bill.

When it comes to expenses, I like to first focus on my fixed expenses because that is money that I need to spend to live. I need a place to live, I need lights, heat and gas, I need to drive so I must have gas and I gotta eat. Additionally, thinking of my savings, money for investing and tithes as expenses helps me to prioritize them. Thinking of those as things I HAVE to pay, rather than something that I can pay after I do things that I want to do helps me to detach myself from that money. You see, I personally feel that once I’ve paid all my bills, everything else belongs to me. If I don’t even allow myself to think that that money belongs to me, it’s easier to let it go.

 

“Money Left Over”

Now let’s talk about the money left over. First things first—I repeat—YOU NEED TO WRITE OUT YOUR INCOME AND EXPENSES EVERY MONTH. The most important reason for this is so that you know EXACTLY how much money you have left over to spend.

Years of not making much money helped me to form the way I handle my “money left over”. So back in the day when I first got started living as an independent adult, I didn’t make much and didn’t have parents who could help me out if I got myself in financial trouble. I was terrified of over extending myself so I didn’t want to have to pay for anything beyond my fixed expenses. This led me to a life of no cable, getting to the club before 11 so I didn’t have to pay, and cooking most of my meals at home. I didn’t have a lot of stuff but I did have peace of mind because I knew all of my bills were paid and I had money saved in case something happened, even if it was just a little.

As I’ve made more money over time, I determine the money I can use on extra stuff, like clothes, cable or other subscriptions (iTunes, Audible, etc.) based on my money left over. Though those are technically fixed expenses, they can be cancelled at any time, so I consider them discretionary (non-necessary). I only add extras when I have more money left over after my bills. The reason I do this is because I don’t want to get attached to stuff I don’t need. I don’t consider myself a minimalist but I guess this could kinda, sorta, just a lil be considered a minimalist practice. But the root of it is from my history of brokenness. I don’t wanna live that life again, friend. What I notice is that people get attached to expensive lifestyle choices, and instead of viewing the extra stuff as luxuries, they start to think of them as necessities. Then they work hard to maintain those things at the expense of building wealth. When creating your budget, if you find that you aren’t saving enough, investing at all, or using a credit card in order to make ends meet until you get paid again, you should re-evaluate any extras stuff you’re paying for that you really don’t need.

You should also determine how much you can spend on big purchases based on your money left over. For example, if you want to buy a new bedroom or furniture set. Here is a big one too: your car payment. I consider this as a deduction from my “money left over”. I do this because the money you have left after your fixed expenses will tell you how much of a car payment you can afford. Yes, a car may be a necessary expense BUT the amount you decide [YOU DECIDE] to spend on a car is totally discretionary. If you just need a car to get you from point A to point B, you can just get a used Honda. So—that’s that on that.

Building the habit of thinking of all of the extra stuff that I don’t really need as discretionary, and adding that only when I truly can afford it helps me avoid what’s called “Lifestyle Inflation”. Lifestyle inflation occurs when you make more money and subsequently spend more. Instead of the basic Netflix that was fine when you made less you now want HD. Instead of going out to eat once a month, you now brunch every Sunday. Instead of shopping sale items only, you pay full price. This is all fine. I do it too. I believe money is to be enjoyed, and you worked for it so you should treat yourself. It becomes an issue however when you don’t increase your saving and investing proportionately as well. When your income increases, instead of increasing the amount you spend, you should increase the amount you save and invest first. If you currently save 5% of your income, and you get a 3% raise, you should increase your savings by 3% as well.

We’ll talk debt payoff in a future blog post, but in general, when completing your budget, I believe debt should be prioritized. When I have it, I want to pay it off as quickly as possible, so I consider it a fixed expense. I also try to determine the date that I want to have the debt paid completely off and make my payments based on that, not the minimum amount billed each month. For example, if I have $5000 in debt and want to have it paid off in 18 months, I’ll divide $5000 by 18, so I’ll pay $278 each month.

 

My Current Personal Budget

Now that I’ve broken it down, here is my monthly budget. Couple things about me, I do not currently have a car payment and have no outstanding debt. I am also saving aggressively to buy an investment property and laundromat business in the next 6-12 months. I categorize the money I’m saving as part of my investing funds because it’s going toward the purchase of an investment. My rainy-day savings is categorized as “Savings”.

 

Though my income, debt and goals have changed many times over the years, handling my money this way has really helped me stay organized and in control of my money.

Share some of your budgeting tips in the comments below. Also let me know if this was helpful!

 

XO,

Khristal Talyse