Basics of Budgeting 101

First things first I’m a realist. Budgeting can totally be boring. It can feel like one of those adult things that just drag you down. Luckily for you, when done properly it can also bring you up.

What is budgeting?

According to Google, it’s an estimation of revenues and expenses over a certain period of time.

People tend to think you only need to start budgeting when debt is acquired or when it is necessary. That is false. Budgeting should start as soon as you start making money in order to develop the best financial habits possible.

Budgeting is planning, and let me tell you, planning saves you a lot of money. Even without debt, these financial habits can help you plan for things you want to do like trips, investments, big purchases, savings, etc.

So what is a budget?

Well first, we should go over the specific components of a budget. Like I mentioned earlier, you have revenues and expenses. To take a page out of Robert Kiyosaki’s book, I like to think of it as money coming in and money coming out.

MONEY COMING OUT

This section varies greatly per person. For example, you might be a student living with your parents, a student living alone, or someone living with a roommate or a partner. In my opinion, this is why budgeting gets sticky. If you must manage it for yourself or with someone it can be a lot of work. Sometimes (most of the time!) it can be awkward to get started because there isn’t an exact spreadsheet for you to use.

Firstly, you need to establish different subsections of expenses. These can be separated mainly into the following: needs, wants, debt repayment, and/or investments.

A typical basic yet flexible rule for budgeting is the 50/30/20 rule.

- 50% needs

- 30% wants

- 20% debt/investments

In your needs section, it can look something like this.

NEEDS

• Rent/housing/mortgage
• Utilities
• Food
• Condoms
• Medications, hygiene products
• Laundry
• House supplies
• Gas/transportation fees
• Phone and Wi-Fi bill
• Emergency (typically money set aside in the case of an unwanted pregnancy, appliance breakdown, car breakdown)
• Anything else that is needed like childcare, insurance, etc.

This section is the most predictable part of your budget. This should be almost identical every month which makes it easy for you.

WANTS

• Leisure
• Entertainment like Netflix, Disney +
• Eating out
• Clothes
• Drugs and alcohol
• Gifts
• Whatever the fuck else people want to buy

This section is where you can really save a lot of money. This can totally be less than 30% of your monthly budget. This is also the area where you are most likely to blow your budget too. A good trick I use here is giving yourself a weekly budget specifically for your wants like 25$ a week.

DEBT/INVESTMENTS

• Student loans
• Credit card debt
• Savings for a new car, down payment, new appliances
• Investing in stocks, real estate, cryptocurrency

This is an area that is crucial in your budget, it is also the missing piece in a lot of usual budgets. This is where you have the opportunity to plan ahead and destroy that debt before it happens or build your wealth and invent new streams of income.

Alright, so now that we’ve gone over the expenses category, it’s time to introduce the breadwinner.

MONEY COMING IN

Mr. or Mrs. Income is your daddy or your mommy. You need this guy to survive out there in the world. This might come in the form of a trust fund, working at Starbucks, or if you’re a crypto prodigy, NFT’s. We all love a little income. That is undeniable. This can also be your 9 to 5 job and/or the combinations of your part-time jobs or side hustles.

Typically, in a regular monthly budget, your expenses will or should match your income. For a financially independent student, this is almost impossible in today’s world. Notice how I used the word almost. That is a whole other subject within itself and one which I will address in future posts.

Income:

• Full-time job
• Part-time job
• Side-hustles
• Scholarships
• Trust funds, retirement funds, student funds
• Dividends/property income/selling off investments

Building a budget is a fantastic way to know about your spending habits. Keeping track of it forces you to think about your future and know when to reward yourself. Personally, I’ve been on a harsh budget for a few months now and I’m only just now starting to learn the best ways to go about it. Also, note that everything mentioned above is entirely customizable to your needs and desires which makes it fun.

So now that you know the basics of budgeting and there is no reason for you to ignore the potential few extra dollars in your pocket. One of my goals is to eventually share the best ways to budget as a student during the winter months and in the summer months where you might end up making the most of your income. If that is something you’re interested in following, stay tuned.

If you have any questions, feel free to reach out on my instagram! @mathieu.simonn