Budgeting for Beginners - How to Make a Budget From Scratch 2021

Budgeting is the number one tool that I use to pay off $35,000 in student loan debt on a $37,000 salary in just under two and a half years. So I'm going to teach you the very, very basics of how to put together a budget for the very first time. Hey, what's up, guys? It's Justine with Debt Free Millennials, the channel to help you crush your debt and live payment free. So if you're new to the channel and you want to start paying off your debt or you're just looking to figure out how to continue living a debt-free life, scroll down to the bottom and hit that red subscribe button. We're going to be talking about how to put together a budget for the very first time. If you're a beginner, this video is for you. Let's hop over to my kitchen table and let's start putting it together. Okay, first things first, when you are starting your budget for the very first time, let's just keep it simple. So the first thing that you're going to do is you are going to list out your monthly income. If you don't know how much money you bring in every single month, you can go back into your bank account statements and look up how much your paychecks are. And if you're an hourly worker, you may want to take a look at the average of the last three months of pay just to see exactly how much you're bringing in on average. So let's say this is $3,000 per month. Next thing you are going to do is list out all of your debt. So this would include things like student loans, credit card debt, personal loans, car loans. You are going to list out everything and you are going to list out your minimum payments because we know that at least you have to pay the minimum payment every single month. So that could look like this. All right, so these are all of your debts and these are the minimum payments that you have to make every single month. Then the next place that we are going to go is our fixed expenses. So fixed expenses could include things like rent, food, utilities, insurance, gas. If you don't know how much you pay for food, utilities, insurance, and gas, you can go back in the last three months of expenses either through your bank account statement or your credit card statement, add up those numbers and then take an average across those three months and that's going to help you determine exactly how much you are going to spend. You can guesstimate here if this is your very first time putting together a budget. If you think you spend around $300 in food, put $300 down and then the next month you are going to track exactly how often you've gone to the grocery store, ordered takeout, and you are going to add that in. Now one note about food is that I do put groceries under fixed because I know I'm going to be buying groceries every single month whereas restaurants and takeout and delivery and things like that would actually go under my fun expenses. So fun would be your next category when you are starting your budget. This would include things like restaurants, clothing, shopping, subscriptions, things like Netflix, Amazon Prime, Spotify, iTunes, whatever your subscriptions are every single month would go under fun because the subscriptions are not a necessity, they're nice to have. And so you're going to again go back into your bank account statement if you don't know how much you're spending on any of these items, add them up for the month and then include them here or take your best guess. Now as you are filling out these three different sections, the debt, fixed, and fun, you want to make sure that all of these items are less than what you are bringing in. Because you want to make sure you're not overspending your income. Let's say all of these added up to $4,000 but you're only bringing in $3,000. That means you're overspending by $1,000 and that's where things in the budget can change. Now the next category that you'll want to pay attention to is future. And future includes any type of savings that you might be working up towards. Maybe it's a new car, a house, or vacation. Whatever it may be, you can definitely add in your future savings categories right inside of your budget so that we can keep track of those financial goals every single month. You'll also want to create a section for fudge. Now fudge is not chocolate, but I guess it could be. But fudge actually means this is your buffer inside of your budget in case you overspend in a different area. So this is like, oh fudge, I forgot that I need to buy mom a gift. And so you can create a buffer here of let's say like $50. And if you go over or you forget about something else that's not included in the rest of your you can pull from your fudge category. This is your buffer here. All right, the last thing that you want to do when you're making your budget for the first time is once you get all of these basic subcategories filled out, you want to add them up with your minimum debt payments and make sure that your total monthly expenses is less than your income. And ideally, you would want this to come out to a zero based budget. So that means our income minus expenses is zero. And the reason why we want it to be zero is because anytime you have money left over, chances are that money either gets spent, missed, it's forgotten about. In most cases, it gets spent and it needs to be allocated somewhere. That's what becomes purposeful budgeting for you. So every dollar should have a name inside of your budget. Now, if this ends up being a negative number up here, so if your income and expenses, if this was like $4,000, as I was saying, then you're negative $1,000 in the hole. That means you're overspending and something needs to be adjusted inside of your budget. And that's a basic, basic rundown of how you put your budget together. So that was obviously a very basic, basic breakdown of how you put your budget together. Now, I personally use a Google spreadsheet and you can use the exact same one that I use to track my income and expenses every single month using the Debt-Free Millennials Budget Toolkit, which is linked in the description box below for you to download for free. And I have a budget toolkit tutorial linked up here so that you know exactly how to use it. Budgeting has been such a great tool for me, not only to pay off debt, but now to hit my financial goals. So let me know in the comments below how you did with starting your very first budget and I'll catch you guys in the next video. Transcribed by https://otter.ai