The Twenty-Something’s Guide to Building Your Budget

Hey friends! If you’re reading this, maybe you’re fresh out of college and planning to take over the world. Maybe you’re 26 and realizing that those student loans are NOT going to pay themselves. Maybe you’re deep in debt and want a way out. Either way, today’s post is FOR YOU!!! Even if you’re not any of those things!

I’m here today to talk to you about BUDGETING. First of all, having a budget is about a lot more than just paying your bills on time. It’s about knowing where your money is going to go.

The Twenty-Something's Guide to Building You Budget

The Minimalist Approach to Budgeting

The minimalist approach to creating a budget is the 50/20/30 rule. This works for some people, but not for all. At this point, this method doesn’t work for me. I have a slight variation on it. That being said, I think there’s some merit to using it as a framework, so let me go into it a little bit for you. This rule is really useful for people with little to no financial experience. Your money gets broken up into three categories.

Essentials

The first category is the essentials, and you need to dedicate 50% of your income to this category. If you’re anything like me, this might have you freaking out. Half of my income in one category? Yes, it sounds crazy, but when you think about what the essentials are, it makes a lot of sense. The essentials don’t really change from person to person; housing, food, transportation, and utilities are costs that everyone living on their own encounters. Keeping the 50% of your income as a boundary for this becomes really helpful. The real goal here is to keep the cost of your essentials to 50% or less of your income.

Financial Obligations

The next category is your financial obligations: savings contributions, such as retirement and emergency savings, and debt reduction. Now, the goal here should be 20% or more of your income. We’re young and in charge, and it’s so exciting to have that paycheck. It’s tempting to go out and spend it all on a new pair of shoes or happy hour with friends. But then future-you is going to have a much harder time. If you practice saving money now in your retirement funds and savings account, future-you will be able to retire and relax. Plus, if you focus on paying off loans and  debit, you will alleviate even more stress from your life.

Personal Choices

The next category is your personal choices. This is the category where you can make the biggest difference in your budget. This includes things like your cell phone bill, internet/cable services, gym memberships, and dining out. Pretty much anything that isn’t essential or planning for a rainy day falls into this category…including shopping! The goal here is 30% of your income OR LESS. This section might include a savings account to save for different things that you want.

With all of this information, keep in mind that these ratios are a suggestion, a framework for you to work within. In some areas, you’ll have to adjust to make it work for the cost of living in your city or state. You’ll want to start by reviewing your income and your expenses, and using the document below, you’ll determine the essentials and the non-essentials, and you can create a budget that makes the most of your money!

Building Your Budget

You’re going to use the provided worksheet to help you design your budget. Click the image and print a copy of the worksheet.

The next thing you’ll want to do is gather some documents to help you assess where your money is going.

You’ll need:

  • bank statements for the last two months
  • pay stubs from the last two months
  • lease/rental agreement or mortgage information
  • utility bills from the last two months (or your most expensive months)
  • loan documents
  • credit card statements
  • any other financial documents you might have

Once you’ve gathered these things, you’re ready to begin. Start by completing Section 1 with your income information (Note: if you’re like me, and your retirement fund comes out BEFORE taxes, make sure to add that number to your income…otherwise you’ll take it out twice on your budget sheet). Then, determine your total expected income and break it into 50/20/30 percent chunks. Put these numbers next to the Essential Expenses, Financial Obligations, and Personal Choices category titles to help you stay on track. I say total expected income because lots of us have side jobs, or sell things to make money. I don’t include that income here because I can’t always count on it being consistent. If you’ve been working your side job for long enough and you know you never make less than a certain amount per month, go ahead and add that in.

Now, start filling in your expenses, beginning with the Essentials. If you’re like me and you live in an expensive area, you might want to pray while you’re doing this. Fortunately, this is one of the easier categories to fill in. For utilities like gas, electric, and water, I recommend rounding up to just above the most you’ve paid. Why? Because it’s better to be safe than sorry. You don’t want to build your budget using your April electric bill, when your August bill will be three times as much because you run your air conditioner non-stop to battle the humidity. Also, make sure you have some wiggle room in your grocery budget.

Next, fill in the Financial Obligations Chart. This is where having my pay stubs handy is helpful. I don’t put separate money into my Retirement Fund yet, so it’s recorded on my paystub. If you have this situation, make sure you added this number to your income total. Determine how much you need to put towards your student loans, and any credit card debt, or other debt, you might have. Emergency savings is really important. The goal for emergency savings should be having 6 months worth of money saved up. I have two emergency savings accounts. One for big deal emergencies, like if I were to lose my job or be unable to work due to injury, and one for little emergencies like getting sick and needing to see a doctor. My big deal emergency account goal is 6 months worth of my salary. My little emergency account goal is about one month’s salary. You’ll have to decide what works for you.

Once that is done, you can decide how to spread out the rest of your money in your Personal Choice category. Some people might choose to include their medical needs in here.

At the end of the month, sit down with all your documents from the past month (save those receipts!) and check how you did. Adjust your budget as needed, and fill out a new copy of the worksheet for the upcoming month.

Want another way to track your money? I have accounts through different banks, so I use Mint ( an app/website by Intuit) to track my spending. It’s completely free, and can sometimes offer advice and tips to help you save on top of everything else. You can also input your budget into Mint and set up goals to help you save, pay off debt, and more!

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