personal budget on how to save money for an emergency fund
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Most people understand the need for a budget, but few ever manage to stick to one, or if they do its rather unenjoyable. And the biggest reason for this is because most personal budget advice online is very VERY rigid. I’m a firm believer that everyone has their own needs and no single problem in the world has only one solution. This includes personal finance problems.

That’s why I’m not going to give you an exact personal budget template for you to follow. Instead, I’m going to give you tips on how you’re suppose to approach the matter in a more organised and effective manner. This way, you can create a personal budget you have a higher chance of sticking with because its actually created to fit your own unique personal needs.

Budgeting methods and tips that will help you get on top of your finances

If you don’t already, figure out how much money you bring in on a weekly, bi-weekly or monthly basis

I’m sure most people reading this can skip this step, but I have met my fair share or people who don’t actually know how much their take home pay is after taxes, insurance or other mandatory expenses that get taken off before you get your pay check.

This has got to be the first thing you do, because no budget under the sun will ever work if you don’t actually know how much you’re working with.

Check your bank account records and figure out how much you’re making. Make a note of it because this number is going to be the foundation of your entire budget.

List out all your regular expenses

People tend to be creatures of habit, which means we tend to spend our money on the same things again and again. So apart from the obvious expenses such as gas, utility bills, food, rent etc. You can list out your other regular expenses.

By listing your expenses you can do the two main objectives a basic budget does:

  1. Tracks where your money is going
  2. Regulates how much you spend on specific expenses

Spend the next hour writing everything you spend money on a regular basis. Gas for the car, utilities, rent, student loan repayments, your morning coffees, your Netflix subscription, your weekly Chipotle take out, everything you usually spend money on. Write it all out.

It doesn’t matter how insignificant or trivial it is, just write it down.

basic personal budget template that works for any financial situation

Categories your expenses into groups by importance

The next step is to categorise your expenses by importance. A big flaw I find with most budgets you find online is to categorise by type of expense instead of importance. There’s no point in putting all your debt in one category when not all debt are equally urgent to be repaid. For example, student loans and credit card debt should never be in the same category when creating an effective budget that will actually help improve your personal financial situation.

It’s a lot more effective by grouping your expenses by how important they are.

Go through your list of expenses you’ve made and group them by importance. Try to have no more than 5 groups and nothing less than 3.

The most important group should include expenses that will instantly put your life in danger if you don’t spend your money on it. This includes, your rent, utilities, health insurance, groceries and anything else which, if you didn’t spend in one month, your life will be affected in a very negative way.

The expenses in your least important category should include things that you can essentially give up, if you ever needed to. These are essentially luxuries that you don’t need to have but provide you intrinsic value. A.k.a, happiness, relief, a break.

Assign a range for each category of expenses

The keyword here is range.

As much as I wished life would go exactly how I want it, it doesn’t.

And so it’s unrealistic to think anyone who sets themselves a fixed number on their budget will be met and kept 100% of the time. It’s unrealistic so why do it.

Instead, you want to give yourself a range. Create your range by getting the recommended amount you should be spending and then adding 10% on top. These two numbers create your range. The purpose of the range is so your budget also provides you a degree of flexibility with your money, because you should always feel in control your money.

Your budget should always feel like a tool and never a financial prison.

To make it even more flexible, the 10% extra isn’t just for each specific expense, but for the whole category. So if, for example one of your categories included coffee $60, gym $50, late night Uber eat deliveries $150 and your subscription to a magazine $19. Then you will calculate your range as such:

Coffee – $60 – ($60+10% = $66)
Gym – $50 – ($50+10% = $55)
Late night Uber eat deliveries – $150 – ($150+10% = $165)
Magazine subscription – $19 – ($19+10% = $20.9)
Your category range = ($279 – $306.9)

You might be wondering why you should also add 10% on top of fixed expenses such as the magazine subscription and gym membership since there’s no way to underspend or overspend on these items. The reason is simplicity.

Many budgets are overly detailed, too detailed that it’s no longer practical to track your expenses, so by simply adding 10% for an entire category will make your life easier and increasing your chances of success.

How to save money if you’re on a tight budget

Again, most financial gurus will tell you to assign a fixed amount as a target and they will also tell you to set this number before you do anything.

I’m here to say it’s not realistic for the person who is living pay check to pay check already and doesn’t have much leeway. I hear too many people say they have nothing left to save or invest. And if this is you then, me telling you to save 30% of your income is just stupid. (because apparently 30% is the “best” amount or some other golden percentage *rolls my eyes*)

Instead, you should look at your ins and outs. By this point you already know how much you are bringing in and how much you plan to be spending out.

Do you have anything left? If you do. Great.

If you don’t or you’re in the negative then you need to start cutting your expenses down by targeting your least important category. Those late night Uber eat orders could be a lot cheaper if you meal prepped a few yummy meals over the weekend ready for you to microwave instead. How much do you really read that magazine?

This is the biggest reason why you should be grouping your expenses by importance because if you ever find yourself working with less, then you instantly know which group to target to alleviate your situation. This method works for everyone, even if you have lots left over at the end of the month you can still use this budgeting method to save more if you ever feel the need for it.

You’re not constraining yourself with percentages that might not be possible or smart for you to do so. (Try telling a person who earns only $4000 per month in NYC to save 30% and only use 20% on essentials…it just isn’t going to happen and for someone earning six figures a month in NYC; saving only 30% is stupid and delaying early retirement or greater financial security)

Be sensible and understand what is the most realistic for your own personal situation.

basic personal budget template that works for any financial situation

Prioritise your emergency fund

If you don’t have an emergency fund already then this needs to be your first priority when creating your budget. Understand your budget should change according to your situation. There’s no point of you spending like normal when you don’t have an emergency fund. Cut your spending down as much as possible until you have an emergency fund created.

Forget about the 10% extra on top and completely get rid of the least importance category of expenses. Your money from those areas should all be diverted into your emergency fund instead.

Remember to repeat this process after you found yourself needing to dip into your fund.

The above applies more to people who are already on tight budgets with not a lot of wiggle room. If you’re lucky to find yourself with some, then instead of getting rid of the 10% extra on your category ranges, you can stop any money going towards your investments. The reason I suggest this is because it will help you replenish your emergency fund faster and cause zero impact on your regular day to day life.

Just by keeping to your budget in the long term will put you ahead of the majority of people in terms of financial health and security. Don’t worry about a few months here and there not adding towards your investments.

Try to use cash or use spending methods with clear records

Creating a budget on paper is easy, but actually following it requires simple and accurate ways to keep tabs on yourself. The easiest way is to make your spending mostly cash. In fact, use as much as cash as possible.

It’s simply a lot easier to avoid over spending, even over your 10% extra wiggle room you give yourself. Because once you’ve spent the cash, there is nothing else for you to spend.

However, I know this is also rather unrealistic. People use their cards for everything and carrying cash is almost an extinct practice. So instead you need to use spending methods with clear records you can access whenever you wish.

By having the ability to check your spending history whenever, you can develop the habit to check regularly and it works the same way as cash, even though you can keep spending and spending and spending because there’s nothing “missing” in your wallet.

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