Hey, what's up guys my name is John and today I have another financial-related video for you guys.
How do I budget my money? How to budget your money.
And this is a topic very true and dear to my heart because
I love finances, I love talking about money. I could talk about money all day.
I'm gonna share my budgeting philosophy in the first part of the video and in the
second part of the video I'm going to talk about how I set up my budget and
hopefully it gives you guys some inspiration for how you budget.
Because I budget my money and track my money religiously I can tell you that
every month, on average, I've been spending $139 on gas for my car.
I spend just over $400 a month on food this year.
I've been averaging 144 dollars and 48 cents on eating out and getting drinks with friends.
And I spent a grand total of
seven dollars and 35 cents on coffee that was made outside of my home this year.
Which is an achievement for me. I used to drink a lot of coffee
at coffee shops and spend so much money and I've definitely cut back on that.
So I can appreciate that fact because I have a budget.
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and hit that like button down below really helps my channel out so much.
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Alright, let's get started.
So the steps of budgeting are this.
The first step is that you need to live within your means.
No budget in the world will fix poor spending habits.
A lot of people fail to budget their money because they want to be
oblivious to their spending habits.
It's very hard to take a magnifying lens and look
at how you're spending your money and where your money is going.
Secondly you need to calculate your yearly or monthly income.
Usually the monthly income is the best way to track yourself.
Then you need to sketch out a basic picture of where you want your money to go.
For a basic starter budget some recommend that 50% of your income goes towards needs.
30% of your income goes towards wants, or things you don't necessarily need.
And at minimum 20% of your income goes to savings.
Now, let's talk about a more involved beginner budget that's a bit more focused.
Experts recommend starting your budget by setting aside 25 to 35% of your income towards housing.
Five to ten percent towards utilities.
Ten percent of your monthly expenses go towards food.
Ten percent towards transportation.
Ten to twenty percent towards insurance and medical costs.
Five to ten percent for personal spending.
Ten percent for recreational or entertainment spending.
Five to ten percent towards miscellaneous expenses.
Ten percent to savings.
And lastly five to ten percent towards giving.
These percentages are just the guide.
So in practice a person who takes home three thousand dollars a month,
their ideal budget would look something like this.
However once put into practice their budget may actually resemble this:
Compare that to a person who is more well-off; taking home eighteen thousand dollars a month.
Their budget may look more like this:
How granular you want to make your budget and your categories
is completely dependent on you and your goals.
If you have this big unruly budget, you're not going to use it.
And if you have this really small, tiny, super simplistic budget.
It doesn't offer you as much important information as you might need.
The next phase is data collection and tracking.
So once you have a general budget you need to actually see how it compares to
your real life spending and real-life budget.
So you need to start thinking about your expenses and classifying them on a day-by-day basis,
a weekly basis, a monthly basis,
and even a yearly basis to get a better picture about how you are budgeting.
Tracking your spending and seeing where your money is going. A program like Mint
can help you do that. Using just Microsoft Excel or Google Sheets will also help you do
that. If you want to just have a notebook and pen and paper? Great! You could do that also.
I use a program called YNAB, you do not need to use this program. It's called You Need A Budget.
It is a yearly subscription, which I budget for and pay. So, that's that's how I do it.
Go out there and look and see what's out there. If you want to use a specific program or software.
And if you want to use YNAB you could use the link down below and we'll both get a free month
of YNAB, so why not? After your free trial you get an extra month.
Log into things like your bank account and your credit card accounts periodically,
right? Don't just let them sit there all month
accumulating money or decreasing in money and not know where those dollars are going.
When people think about budgeting they always attribute it to something that is bad.
They almost equate to like a diet, something that's restrictive
and will prevent you from having fun or living life to the fullest.
And I completely disagree with that notion.
I think a budget is clearly data and information and
a way of life that you want to kind of subscribe to.
But it's not, you know, set in stone. A budget is flexible. A budget can be
exactly how you need it to be to achieve your goals.
And having a budget makes me feel better about actually spending money,
because I know that it is money I can afford to spend.
It's money that I have earmarked
for that particular item, or thing, or experience that I'm going for.
Personally, I don't care how you spend your money as long as you budget.
So here is my budget, right? And my budget categories.
Keep in mind that this is my budget. I am a single, young individual living in Pennsylvania.
I do not have any dependents, so my budget, my lifestyle, priorities,
and spending habits may be a little different than yours in the end.
And this is how I set mine up. You could use it as inspiration.
First and foremost at the top of my budget I have my savings and investments.
I automate my savings and money is automatically taken out of my
paycheck and is sent to my investment accounts and certain savings accounts.
I highly recommend that you do this so that you're paying yourself first and
you're automatically saving a predefined amount of money every single paycheck.
Next, I have fixed expenses or things that I know I'm going to be paying for every month.
So for instance, my rent. If you have a mortgage? Your mortgage would go here.
Parking of my car in my apartment building.
My other fixed expenses include things like:
electricity and a water bill even though the amount that I wind up spending is variable I
still included my fixed expenses because I know every month, I'm going to be paying this bill.
Other fixed expenses can include a cell phone bill.
I have my internet and cable attached as one.
If you're cutting cable, maybe your bill will look less than mine.
I have my gym membership here and fixed expenses.
Next, I have living expenses.
In living expenses, I have things like my gas, groceries,
coffee for home but that's for me, right?
Clothing, grooming and household items.
Those are my living expenses.
The next item in my budget category is for any debt or debt payments that I'm making.
At this present time, the only debt I have that I'm paying is a car payment.
After that I have long term expenses.
So in my mind long-term expenses are things that I definitely will have to pay
at a certain point in time however I do not pay for them monthly.
If you understand what that means?
So here goes the things like auto insurance, auto maintenance, subscriptions,
any professional or educational kind of thing / endeavors that I do.
The idea behind this category is
that I pay my auto insurance every six months so that I could save more money.
So I take that value and I divide it by six and that is the amount of money, every month,
that I save towards my auto insurance. That way once the six month period comes along
I have the money sitting there ready to be spent on my auto insurance.
It's not like I'm gonna just forget about my auto insurance and then...
Oh! Oh! It's June!
OH GOD.
I do the same thing with subscriptions.
Some people might list out every single subscription in their budget and I don't do that.
I actually just add up all my subscriptions together. I get one yearly value.
I spend X amount on subscriptions all year and I divide that by 12.
So my YNAB subscription might be due in October.
My Amazon Prime subscription might be due in January.
It doesn't matter when they're due.
I have money in the subscription “envelope” ready to pay these subscriptions.
I have a line item for hobbies. If you have hobbies you can put them under this line item.
It's important to have hobbies treat yourself. Clothes.
Treat yourself.
Fragrances.
Treat yourself.
Massages.
Treat yourself.
MIMOSAS.
Treat yourself.
Fine leather goods.
Treat yourself.
It's the best day of the year.
The best day of the year!
Next category I have is for entertainment.
So, that's where I have my coffee.
Going out.
I have my alcohol here. My date night. I have eating out with friends.
I have things like movies, video games, music all in one category.
My next line item or big category is vacation and travel spending.
Just a travel vacation spending fund and a ride share fund.
The next category I have is giving or money that's going to go towards other people, right?
So whether you think that you need to give a certain percentage of your income every month...
Personally I have gifts for others, Christmas gifts, and then donations.
We celebrate Christmas in my family and the mindset is, you know, that every year
you're gonna go buy people Christmas gifts.
So once again why wait until December?
From January 1st up until Christmas Day I'm saving money towards Christmas gifts.
So that's my budget and those are my budget categories.
Guys, I think this video is long enough.
I really hope that someone out there is now inspired to at least start looking
into budgeting at this point.
I'm going to be making more financial related videos.
I'm going to be making more Physician Assistant related videos,
so if you like this type of stuff please feel free to subscribe to my channel.
Don't forget to like the video down below if you found it helpful.
Or check me out on Instagram.
Leave a comment let me know what you think.
And guys stay safe out there, have a great rest of your day.
Bye bye.