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how to budget (or not to)

Have you ever opened an Excel spreadsheet with the intention to jot down ALL your expenses, finally create a monthly budget to follow… Only to get overwhelmed within 3 seconds of budgeting? 

We’ve been there! 

In this blog post we cover how to budget money the easy way: ditch the cumbersome task of counting pennies, focus on 5 key numbers, and make your budget work like magic. 

Hot Tip: Once you create your budget, stay on track with Penny’s smart calculators and money moves. Sign up today. 

👀 4min read

how to budget money

📸: Pinterest

How much should I save?

The cookie-cutter approach of “save 10%” may work for some as a rule-of-thumb. But it’s far from the golden goose financial advisors make it out to be. 

Truthfully, there’s no right answer. Only what’s right for you, specifically. 

So, how do you calculate how much you should save for your budget? 

First, ask yourself:

  • what are you saving for? Emergency? Travel? Homebuying? 
  • list it out, add it up, and
  • bring it to the exercise in the next section

If you don’t have a clear savings goal in mind yet, ask:

Which money areas need attention? 

For example: 

  • do you have at least 6 months worth of emergency savings? 
  • have you maxed out your retirement accounts? 
  • is there debt you can afford to pay off more of? 

Once you have an idea of what your life and money goals are, it makes saving and budgeting way easier.

How to budget money: Remember 5 key numbers

Traditional budgeting tells you to calculate everything from $8 lattes to a $3 subway fee. No, no, no. 

Unless keeping track of every single cent in your wallet brings you immense joy, please do yourself (and your sanity) a favor:


What do you have to do to create a good budget? 

Remember these 5 key numbers: 

  1. take-home pay (aka income after taxes)
  2. must pay expenses (rent, car payments, etc.)
  3. any debt payments you must make
  4. your retirement contribution number
  5. your budget number

Your take-home pay – minus expenses, debt, and retirement contribution = YOUR BUDGET NUMBER. 

And THAT is the ONLY number you need to know to create a kick-ass monthly budget you’ll actually stick to! 

This is what we refer to as the Mini Budget Method. The goal of this approach is to make life easier for your brain, and more efficient for your wallet. Win-win!

Once you have your 5 key numbers, what happens? Math it out! 

Hot Tip: Once you get clear on your numbers, auto-pay and auto-transfer as much as you can! Automatic transfers are the easiest way to stay on track. 

How to create a good budget

Here’s how you apply the Mini Budget Method with the 5 key numbers described earlier. 

These are example numbers – Fill yours in as we go!

  1. take home pay = if you earn about $3k a month, that’s $36k a year
  2. minus rent or mortgage = if you pay $1k a month, that’s $12k total
  3. minus food & must-pay expenses = say about $750, that’s $9k a year
  4. minus debt, savings, and/or retirement = maybe $650 total, that’s $7.8k a year
  5. what’s left? around $600 a month, or $7.2k a year

This means you have $7.2k a year leftover (or $600 a month) to spend, invest, or save for something big – like home, travel, etc. 

The $600 a month is your magic number. 

You know you’re in a good place financially, regardless of spending habits, as long as you spend less than $600 a month (or $7.2k a year). 

What about your life and money goals? 

Let’s say you want to gauge if you’ll have enough for a trip to Europe. Or you want to start saving for your future home. 

If you haven’t subtracted it as a savings goal already, now is the time!

Subtract the money needed for your trip or down payment, and adjust the extra monthly spending to accommodate your (new) monthly budget. 

Even if you don’t have enough, this exercise will help you make those big financial decisions with more ease and confidence.  

If you’re in the red… Don’t fret. 

You can choose an area to trim from, learn how to manage debt confidently with Penny, or find creative ways to make more money, so you can get your finances back on track.

Bottom line for a healthy budget

Instead of trying to memorize a bunch of different numbers you need for each spending category…

  • Learn your 5 key numbers. 
  • Work your way backwards. 
  • Decide on 1 monthly budget goal you’re going to stick to. 

…And voila! 

As long as your spending is less than that number, you’re golden! 

You’ll know intuitively that you’re hitting your financial goals, and setting yourself up for success now and in the future.


Want to learn more money hacks? 

At Penny Finance, our goal is to provide easy and digestible financial education for women – so you can increase cash flow today, and retire with wealth tomorrow. Click here to join or learn more

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