When I got my first ever ‘big-girl-full-time-job’ paycheque back in February, it felt great, but I never had this amount of money before and I didn’t know how to budget. I let it sit there for a little while before I decided to tackle my finances and set a budget in place. So if you’re in the same boat, here are some easy budgeting tips for beginners that I picked up along the way.
Check your finances
I know we all hate the dreaded sitting down and checking our bank balance (especially after a night out). However, it is necessary to know where our current finances are and consider where we want to be in a few month’s time. Your first step is to look at what your necessary expenses are, your wants, and your savings. It can be difficult to differentiate your necessities from your wants, but this is a necessary step if you want to get to the bottom of your spending.
Look at your necessary expenses
- For example- your rent, transport, bills, food, student loans.
- Your necessary expenses are anything that you cannot live without (no, that does not include your shopping addiction).
Your Wants
- Some examples of your wants are- socialising, holidays, presents, clothes, makeup, anything you like to spend your money on that isn’t a necessity.
- It is important not to forget about your phone bill, Netflix subscriptions, Spotify etc.
Savings
- Your savings fall under categories such as- investment capital, a ‘rainy day fund’, or any other savings goals you’re working towards.
Take a look at your finances and identify where you’re currently spending most of your money. Think about how you can reduce your current expenses, especially if you’re wasting money on things that don’t bring you joy.
It might be easier to identify 3 areas that you like to spend your money on the most. For me, that’s experiences, holidays, and socialising. For you, that could be clothes, makeup, and your car payment. Then, look at how you’re spending your money outside of your top 3 ‘wants’ and think about how you can reduce it.
Oftentimes, when we take a look at what we are spending our money on, it can be shocking how much we throw away on things we don’t even want. By identifying where we are spending our money, we can try to reduce those impulse purchases as much as possible and spend more on the things that are actually important to us.
Look at budgeting options
There are many different budgeting options out there. You might need to try a few different methods before you find what works for you. Some of the more popular budgeting methods are:
- 50/30/20 rule. This method allocates 50% to your expenses, 30% to your wants and 20% to savings. This is quite useful if you get paid monthly and is a straightforward method for differentiating between your necessary expenses, wants and savings.
- Revolut vaults– this method makes it easy to separate your finances into distinct categories. You can create vaults for your wants (holidays, christmas fund for e.g.), and a vault for your savings.
- Cash stashing method– I never use cash anymore so this is definitely not one for me. However, I have seen many people using this method if they need to create a stricter budget and enjoy using physical cash. This would be useful for anyone who gets paid in cash, or tips.
Personally, I tend to use the 50/30/20 rule. 50% of your paycheque goes to expenses, 30% to my wants (holidays, experiences, socialising, car), and 20% to savings (investments and ‘rainy day fund’). I find that this gives me the most control over my finances. However, it is important to find out what works best for you in the long run. This process will be a lot of trial and error and trying to figure out how you approach finances.
Consider your savings goals
Now, it’s time to consider where you want your savings to go. Would you like to start trading on the stock market? Do you want to save up to buy a house? Or maybe, you want to replace your car in a few months.
Think about what your savings goals are and work towards those goals.
It’s important to remember that everyone’s savings goals are different. Take some time to figure out what yours are and avoid following the crowd. Just because everyone else is saving up for a fancy car, does not mean that you have to. You do you x
Do a budget check-up
Our priorities change throughout the year. During the pandemic, most people were saving a lot of money. Now, as we are socialising more and going on holidays, we may need to re-adjust our savings and spend a little more.
Make sure the budget you choose is right for you and what you want to achieve. As life changes, so will your budget, and you may have to adjust your spending vs savings ratio.
Set up automated payments
Now you have your plan thought out, you can automatically set up direct debits to place your money every month so you don’t have to even think about it! How handy.
If you tend to swap from your savings to your current account, maybe think about getting a locked savings account so those impulsive purchases can’t tempt you. I see you swapping those funds on a Saturday night after a few too many drinks. I see you. Yes. I am looking in the mirror.
Conclusion
Now, you’re a millionaire. There you go, no need to thank me.
If only it was that easy.
I know this exercise may seem pointless at the time and it actually takes some discipline and structure (which I tend to lack), but your future self will thank you. It’s nice seeing little bits of savings building up and you’ll feel like you’ve more control over your spending. Or perhaps, you’ve never even thought about budgeting, because you haven’t managed to secure that ‘big-girl-full-time-job’ (or whoever you identify as) paycheque yet. In that case, maybe take a read of, ‘How I got my Digital Marketing Graduate Job During Lockdown‘ and come back to this blog post in a few months.
I hope you found these easy budgeting tips for beginners to be useful. Let me know how you approach budgeting in the comments or send me a DM on Instagram!
Eilís x
