Budgeting for Women

Determine Your Income

The first step to creating a budget is figuring out what your monthly income is. If you work one full-time job, this step is easy. You can look at your paycheck and see how much you earn in one month. If you work multiple jobs or freelance on the side, make sure you capture all income streams to determine your total income.

If your income varies each month, determine a monthly income based on the lowest end of the spectrum. For example, if you make between $3,000 to $3,500 a month, use $3,000 as your monthly income to budget around. You can allocate the extra money you earn later, but you want to create a budget based on what you know you will earn each month.

Track Your Spending

There are two types of spending to track: fixed and variable. Fixed spending includes payments for housing, utilities, food, transportation, minimum loan payments, and insurance. These expenses are the same rate each month and they are not adjustable.

Variable spending includes payments for going out, entertainment, gym memberships, classes, and vacations. These expenses can vary each month, and might be reduced based on lifestyle changes.

Look at your past spending patterns or track this month’s spending to see how you are dividing your income between fixed and variable expenses. This information will be valuable as you take the next step to create a budget plan.

Create a Budget Plan

There are a wide variety of budget plans you can choose from, but one that is popular and can serve as a guide is the 50/30/20 budget. In this budget plan, you allocate 50% of your income for fixed expenses, 30% for variable expenses, and 20% for savings or additional debt payments.

For example, if you earn $3,000 each month, you could spend up to $1,500 on housing, groceries, utilities, and other fixed expenses. $900 could go towards things you enjoy or needs may come up for that month, (unexpected home or car repairs, hospital visit, gifts for other people, etc.). $600 could go towards paying off debt, or if you do not have debt, consider putting it into savings or retirement accounts.

Of course, everyone has unique circumstances and this budget plan may not work for what you need. The most important thing is to be mindful of how you are allocating your spending each month. After tracking your spending, you may be surprised that you are spending a far higher percentage of your income on variable expenses than you expected, and that not enough is being put into your savings.

For women over 50, it is important to save close to 20% of your income for retirement. Start with the 50/30/20 budget plan and adjust it as you see fit.

Envelope Budgeting

If you review your finances and track your spending monthly, it will become a habit that feels natural and easy to do. As difficult as it may be at first, staying diligent and focused on budgeting will make it a lot easier.

However, if you are still having trouble sticking to your budget after a few months and continue spending, that is also understandable. We develop our habits over our lifetime, so it can be difficult to change our ways overnight.

There are a few other methods you can use to help instill more discipline into your spending, including envelope budgeting. If taken literally, you can store away all your cash into separate envelopes that you must use to make certain purchases.

For example, if you limit yourself to spending only $300 on groceries a month, you could keep $300 in an envelope labeled “groceries” and every time you go to the store, you can only use that envelope to make your payment. If you were to use a credit card to buy groceries, it would be easy to go over your budget. With an envelope, the benefit is that there is no wiggle room or way to excessively go over budget.

If you are concerned about carrying physical cash, there are also apps and software that you can download to create virtual envelopes, which similarly prevent overspending in certain categories. By setting these hard limits for yourself, you can finally break your spending habits and get used to following the budget plan you want for yourself.