If you’re putting together your budget for the first time, it can be very overwhelming. So many bills, so many places your money goes. That first budget is scary.
When I first started managing my money, my method was very simple: check my bank account. If there was money in it, I could spend it. If there wasn’t, then I couldn’t afford anything.
But that method creates a whole pile of problems. Bills would come up, and I’d have to figure out money. It never really was a simple as I thought it could be.
When we started creating a budget, everything changed in our finances. I know that sounds dramatic, but it really did. Budget has the connotation of being a dirty word – I mean, who wants to live a budget life? It sounds like you’re cheap! But a budget is merely you controlling your money instead of you being controlled by it (or the lack of it).
A budget is merely a shift in power.
It empowers you to have control over your finances. It empowers you to choose the lifestyle you want. It empowers you to be able to make choices without feeling terror deep in your soul about the financial implications of basic life events, like replacing a car or buying a home.
Here are some items that you need to make sure you have in your budget, and underneath each item, I’ve listed a bunch of sub-items, so that you have a comprehensive list for your own first budget-making purposes.
Home
Whether you’re buying or renting, you’re probably paying for your home. This should account for between 25-30% of your total income for the month – and less is better!
Here are a few housing-related costs you may need to remember as you are creating your first budget:
- Rent or Mortgage payment
- HOA
- Renters/Homeowners insurance
- Utilities (trash, water, sewer, etc.)
Transportation
Best case scenario, you completely own your car and have no monthly payment. However, that’s not reality for everyone, so it’s important to make sure that you have this in your first budget, and know when it’s going to be paid off. My personal opinion – no judgement here! – is that it’s best to own your car outright and not owe money on it. You can go “upside down” on a car loan very quickly (meaning that you owe more than the car is currently worth), and discover that your auto insurance doesn’t cover the full value you owe on the car if it is totalled. That can quickly wreak havoc on your finances. It’s our goal to always pay cash for cars to avoid this possibility.
Here are a few transportation related expenses to add to your first budget:
- Car payments (if you have them)
- Insurance
- Fuel
- Maintenance
- Sinking fund to replace the car – it’s a depreciating asset, you WILL eventually have to replace it!
Food
Food is one of my favorite budget line items. I like food. I like eating healthy, and I like eating well. We prefer to eat fresh foods, and avoid boxes whenever we can. No matter how you choose to eat, you gotta account for it in the budget! If you’re paleo, vegan, keto, gluten free, intermittent fasting, intuitive eating, on a cheetos and mountain dew diet – you gotta pay for it!
To create my first food budget, I start with tracking grocery bills that are BASIC. I shop weekly, and know that an average grocery trip will be roughly $100 (Aldi and Walmart).
We do eat out a few times a week. I meet Joe for lunch on Mondays (and we go to Noodles & Company) and Joe traditionally goes to Panda Express on Friday nights, as he has done for years. We occasionally will eat out for our weekly date night, but to save money, we typically eat at home and watch Star Trek: The Next Generation. Yes, we live exciting lives. If you’re going to budget for restaurants, choose your priorities. I love being able to meet Joe for lunch on my “off” work days. Tradition is important to Joe, so he loves going to Panda Express. I don’t mind cooking for our date nights, because it’s less about “getting out of the house” and more about “focused quality time.” That may change in the future when we have kids, and want to get that “focused quality time” in a quieter location…without kids around.
Here’s what you’ll want to make sure you have accounted for in your first budget:
- Grocery store purchases
- Amazon supplemental purchases (if you’re on any kind of special diet and need additional items that are harder to find)
- Restaurants
Lifestyle/Miscellaneous
Some of the items that I add to lifestyle may feel a little controversial, but they just fit here. You can technically live without them, but they really do make life better. Some of these, everyone will choose to have in their budget. If you’re REALLY hard core into eliminating items from your budget to save money or reallocate money towards paying debt, this is the category to scrutinize first.
- Health insurance/life insurance
- Phone
- Internet
- Cable
- Clothing (please budget for new clothing, or at least for a Ross/Marshalls/TJMaxx/Goodwill trip every now and then)
- Subscriptions (Netflix, Hulu, Disney+, etc.)
- Personal care (makeup, skincare, haircuts, etc)
- Gym memberships
- Pets/costs of having pets (food, vet, etc.)
- Hobbies (I currently rent a harp, and you’ll pull that rental from my cold dead STRONG fingers!)
Debt
This one hurts, but if you have debt, it needs to be in your first budget. NO SHAME if you have debt. It happens. It really does. It happens when people don’t have their finances under control, when people just haven’t learned how to manage money effectively, when people make emotional decisions with money – IT. HAPPENS. Period.
It doesn’t have to be this way. You don’t have to live in debt. I’m a huge fan of the debt snowball method advocated by Dave Ramsey, and eliminating that debt as quickly as possible. I’ll definitely be writing more blog posts about debt, and paying it off – but those are coming.
The biggest part is removing the shame of being in debt so that you can take action.
Make sure that if you have any of these debts, they are accounted for on your budget:
- Student loans
- Credit card debt
- Personal loans
- Car loans
- Any financed items (furniture, electronics [including phones!], etc.)
Kids
We don’t have kids yet, so we don’t allocate any of our budget to them. Although we probably should start a sinking fund for them, because I hear they are expensive. Here are a few things you’ll need to add to that category, based on my experience as the oldest of 7 kids, and what I watched my parents pay for:
- School/education – even if they go to a public school, you’ll have expenses!
- Food – plan at least $50 extra a head per week, minimum. This cost will be more when they are infants (if fed any formula) and when they are teenagers (when they eat EVERYTHING without regard).
- Clothing – blink, and their clothes won’t fit. They’ll need new shoes almost every other month. My little brothers would SHRED their jeans.
- Health – kids are walking bundles of germs. Sickness is cyclical – if one kid gets sick, all the kids will get sick. It’s just a fact of life.
BONUS CATEGORY: SAVINGS
Make sure that you are saving money! No matter where you are financially, you should be saving some money, even if it’s a small amount. Small amounts can add up quickly and create an amazing nest egg for your future.
Related post: How to Save Money for Anything
- Sinking Funds
- Retirement (401k)
- Investment Funds
- Savings Account
What categories do you add in your budget? Did I miss any essentials? Tell me in the comments about your budgeting priorities!
