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
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:
If you don’t have a clear savings goal in mind yet, ask:
Which money areas need attention?
Once you have an idea of what your life and money goals are, it makes saving and budgeting way easier.
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:
DO NOT BUDGET THIS WAY.
Remember these 5 key numbers:
Your take-home pay – minus expenses, debt, and retirement contribution = YOUR BUDGET NUMBER.
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.
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!
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.
Instead of trying to memorize a bunch of different numbers you need for each spending category…
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.
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