List of 3 Steps to Creating a Budget for Only the Necessities

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If you have ever hoped to have all your finances in line and feel more stable over your spending habits, you need a budget. What a budget will show you is all the money you bring in against your required necessities like rent or a mortgage as well as discretionary spending.

People often view budgets as a tedious task. Still, integrating budgets into your life can help you achieve the financial goals you desire.


1. Determine Your Income

Monthly Average

For those of you that get paid a base salary (not including bonuses) and are paid either bi-monthly, bi-weekly or, monthly, try to follow this formula.

Take your net income for the past 3 months, add them together, and divide them by 3 to calculate your average monthly income.

Staggered Paychecks

For those of you that receive income based on commission, tips, or services performed, you’ll need to determine the average income you receive. It is best to determine this average by using the period you received the least amount of business/tips/commissions.

That way, you can better manage your finances regardless if business is booming or not. It also will leave you with less grey hair.

2. Track Your Needed Expenditures

Your expenses would be your rent/mortgage, clothes shopping, groceries, pet food, etc. For me personally, I find it useful to create a spreadsheet that outlines all of my expenses. There are free mobile apps available should you want to be a bit more hi-tech.

So let’s say your monthly take-home income is $3,300/ month.

The golden rule is to use 70% of your monthly income on these expenses.

  • 3300 x .70 = 2310

This means you should allocate roughly $2,310 a month for your expenses. Of course, if you can lower this number, then you should.

At this point, you will have $990 left, your 30%.
Typically you will see people mentioning to use 10% for your savings, 10% for investments or vacation goals, and the final 10% for charities.

Instead, I would rather suggest using 20% to pay off any major credit card bills while allocating 10% to savings. This is what I’ve personally done and I’ve found it the most effective way to slowly building my savings while chipping away at my debt.

*Disclaimer: I am not a CPA*

Putting away money in a savings account is crucial as most individuals do not have money stashed away for a rainy day. As you should already know, life does not always go according to plan, so you should have a financial cushion for yourself just in case. If you’re renting/paying a mortgage, your cushion should be about 6 months’ worth of cash saved in your account.

With our $990 leftover, we will do the following:

$660 -> Credit Card
$330 -> Savings

You will be far better off by tackling your debt.

3. Make Cuts

There are multiple avenues to improve your financial situation, but ultimately it will be a combination of cutting expenses and increasing your income.

To help you with some ideas to increase your income, check out our article: Top 5 Side Hustles for Side Hustlers

Now that you have some ideas on how to potentially increase your income, let’s go deeper into cutting costs.

To start, you will need to write down all of your expenses, and I mean ALL of them for the month. If you’re one of those people that likes to charge everything on your card, then this will be easy for you. If not, then you’ll need to sort through those receipts of yours!

The plan is that if you see that your earnings are less than what you pay for your necessities, then you need to make some much needed financial cuts.

If you have a gym membership that charges $50 a month and you only go once? Get rid of it. Spending money on knickknacks just because they were on sale? Slap yourself and say “Stop it!”

Don’t do that last part, but in all seriousness, you can identify financial drains by just having a long hard look at your financial statements.

All in all, use this opportunity to improve and to be smarter about your financial decisions. You will thank yourself later and you will be a lot happier.

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