How to Create A Budget & Save Money

Drop the avocado toast, we're talking all about personal finance today. I know, I know. You probably haven't mentioned that phrase since college, but no one wants to live paycheck to paycheck. Today I'm going to help you understand personal finance and create a budget that will have you start saving money money money!

If you haven't heard of the 50/20/30 rule, get acquainted, sista! The rule breaks down your monthly income into three spending categories: essentials, savings, and personal. From there you will be able to create a monthly, weekly or daily budget. Personal finance is complicated, however this rule will help you organize your expenses and work towards your goals.

Create Your Budget

Your budget is based on your take home income. This is the money you receive each month after taxes (federal and state) and deductions (medical insurance, 401K). You won't need to calculate this since your employer does this for you. For this exercise, let's say my take home pay is $1,500.00 every 15 days or $3,000 a month.

50% of income - Essentials

Separate 50% of your take home pay into your essentials bucket. This should account for no more than 50% of your income. These are the things that you have to pay for like gas and groceries.

I like to break these out into bills and necessities. Most bills can't be adjusted so I need to ensure that I dedicate my income to them first. Grocery falls under necessities because obvi I need to eat, however I don't need to spend hundreds at the grocery store every week.

I prefer to calculate my budget monthly first before separating out weekly. Also, I live with my boyfriend therefore some bills are split are split.

Take Home Pay = $3,000
Bills = $1,037

• Rent - $1,200 $600
• Credit Card Payments - ~$100
• Utilities (electric) - $65 $33 
• Car Insurance - $144
• Internet - $70 $35

Then I break out my necessities

• Grocery - $150 $75
• Gas - ~$50 / month

In order to maximize this budgeting process, your essentials shouldn't count for more than 50% of your take home income. If it does, this is where you need to prioritize what's important. Can you downsize to a smaller home or apartment to save you money? Can you live with a roommate to bring the cost down? Are you willing to move further away where rent is cheaper than living in the city? Try to make adjustments that will help bring more money in your pocket.

20% of income - Savings

Take Home Pay = $3,000

Savings= $600

Your savings should count for 20% of your monthly income. My savings account is part emergency fund part house down payment fund. An emergency fund is money saved to cover any unexpected expenses such as job loss, medial emergencies, etc. Your emergency fund should last you around 6 months of your monthly income. It is my goal to purchase a house in the near future and I want to ensure that I have money saved in order to decrease the mortgage amount.

30% of income - Personal

Take Home Pay = $3,000

Savings= $900

Lastly, 30% of your income should go to the fun things such as vacations, shopping, furniture, etc. This might seem like a lot, but some of this spills out into medical co-pays. And having 30% of our income will help you not feel as if you're living paycheck to paycheck as you still have some wiggle room. 

Let's be honest here. This budget will suck at first. You're not going to stick with it at first. you might cheat a little bit. But once you get the hang of it, it's really helpful. I've been able to dramatically pay off the majority of credit card debt I had while moving and living on my own for a year.

Hopefully this all made sense to you and was helpful. If you have any questions, leave them down below and I'll make sure to answer them for you.