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Updated about 9 years ago, 10/12/2015
Help me with my Budget!!!! 23 year old
I'm trying to save 1200 a month to invest on new properties. I'm having trouble making a detailed and in depth budget that I can study and stick to over time. Are there any tools you've found that help develop a budget, if so could you share? Also, I was hoping if any one had any advice on budgets specifically how a person can go day to day accounting for every dollar. I'm single, im house hacking. Thank you in advance for helping with your advice...
Hi @Benjamin Allen, I use a software program called You Need A Budget or YNAB. I used several budget programs like Microsoft Money and several spreadsheets but YNAB has worked the best for me and I have been using it for several years now. It comes with a 35 day (don't quote me but I think its about 35 days) free trial and then it is 60.00 to purchase but for me it was well worth it. There is also an app for your phone to help you track purchases. It is a great tool and has many useful features. Make sure you watch and read all the tutorials and all the how too's to understand the philosophy behind how it works. It has helped me save money that I am not putting towards some real estate and I even got my wife hooked on it. The link is http://www.youneedabudget.com. I don't work for them and have no affiliation with them it is just what has worked really well for me. Let me know if you have any questions about it and I'll try to help but the website is very informative. Good luck in your budgeting!
Steve
I was in this position last year, and I think that budgeting is a good start, but perhaps an even better place to look are in your main life expenses like housing (which you are doing a great job on by house-hacking), transportation, and food. I actually wrote an article on what I did in your position last year:
"How I saved $20,000 in 2014 and used it to invest in Lifestyle Design"
@Benjamin Allen I have a spreadsheet that my wife and I have used for a few years. It helps track everything to the dollar. Shoot me an email and I will send it to you if you are interested.
Originally posted by @Scott Trench:
I was in this position last year, and I think that budgeting is a good start, but perhaps an even better place to look are in your main life expenses like housing (which you are doing a great job on by house-hacking), transportation, and food. I actually wrote an article on what I did in your position last year:
"How I saved $20,000 in 2014 and used it to invest in Lifestyle Design"
Loved the article man I really appreciate the advice, how in depth did you go when calculating the amount of food you wanted to purchase, or did you go based off a dollar amount or some other means of measurement? I was thinking of a dollar amount biweekly, what do you think?
Thanks again for all the help everyone I really appreciate the help. I'm trying to buy my 3rd property next year and I will probably need between 20 and 25 thousand to buy it!
We honestly have done best by figuring out our big expenses and than we have x left for the month or week. I have a finance background background and this was much easier!!
Originally posted by @Elizabeth Colegrove:
We honestly have done best by figuring out our big expenses and than we have x left for the month or week. I have a finance background background and this was much easier!!
Hi Elizabeth, thank you for the comment. Maybe you could explain, I'm not sure what you mean by figuring out your biggest expenses? Could you explain please? Thanks again!!!
I think that you may be overthinking it on the food budget. I don't and never have cared much about whether I spend $50 in a week on groceries, or $75. It's semantics. Sometimes, grocery stores have sales and it makes sense to buy something delicious.
The point is, if you are purchasing groceries and food with thought given first to what you need, and what is healthy, and not splurging on ridiculous items, you are doing just fine. Budgeting at that point becomes a pain.
Buy good, simple healthy food from the grocery store, and buy things that you'll enjoy. It makes it much easier when you think wow - my dinner of chicken, veggies, rice, and beans cost about $3 on average, compared to the dinner out which goes for $15-$20 at minimum. Who cares then, if your dinner cost $4.50 instead of $3?
Don't overthink the grocery budget too much - you've already made the big win by shopping and cooking yourself.
Start using websites such as Mint to track your expenses (they have an app too, all for free). Knowing what you spend your money on is so important and Mint sort of does it automatically and groups it into different categories. It's not perfect but good enough to get started.
I have to agree with Scott about your grocery budget. There are probably a lot of ways to cut costs first without worrying about your grocery bill too much. A cool website for affordable and healthy home cooked meals is BudgetBytes, look it up. She calculates the costs per ingredient and gives a total per recipe and so on.
I would recommend using www.mint.com. Mint automatically tracks your electronic purchases and classifies them by type (food, gas, housing, etc).
It seems like right now that you are trying to build a budget without knowing what your historical spending pattern looks like. This is setting yourself up for failure right from the opening.
Once you have a tool like this, figuring out your biggest expenses, or what class of item you spend the most money on, it'll be easier for you to understand where you can go leaner.
You don't want to spend time accounting for every single dollar, that's not an effective exercise. The important part is committing yourself to lifestyle change and being self-aware. Catch yourself before making frivolous money decisions and adjust your behavior.
I'm a fan of a simple notebook in your pocket. Pull it out and write it down anytime you spend money. If you do this for a few months, you'll be able to spot your "spending leaks" and see where you can trim some more $ for savings. Plus-- you'll be a lot less likely to impulse spend, because you'll know you have to write it down!
If you haven't already discovered it, a great blog on living a frugal but satisfying lifestyle is mrmoneymoustache.com. (his byline is financial freedom through badassity- it's a really fun read, and excellent advice)
@Benjamin Allen I've been in your situation a few times, and by far the technique that works best for me is automatically paying yourself first...
I have an auto transfer set up to send money out of my checking account every month into another account that I don't touch. You can also have your employer split your paycheck into two accounts. I've found that if I never see the money and in my mind never really had it to begin with, you figure out ways to spend less because you're essentially forced to. I have CapitalOne 360 and Ally checking / savings accounts, and just set up an online transfer from one to the other (also have auto transfers to investment accounts, reserve accounts etc..).... the bottom line is that you should be paying yourself first, and that will force you to think creatively about your spending elsewhere. You may want to start a little smaller, auto transfer $500 a month or maybe $100 a week so it's more of a slow burn than one huge hit. From there just keep bumping that number up until you're reaching your goal.
Also - don't forget about the other side of the equation... how can you earn more money? All that really matter is what you keep, so to keep more you either have to earn more or spend less... there are so many ways now to make extra side cash on a flexible schedule (uber, instacart, freelancing, craigslist gigs etc...) that if you're hungry enough, you'll be able to find a way to make ends meet and meet your savings goal.
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I pack my own lunch, brew my own coffee, drive an inexpensive car and stay out of convenient stores and malls. @James E. - great suggestions!
A new online budget tool called everydollar.com just launched by Dave Ramsey. Here is a review of it vs mint: http://scottalanturner.com/everydollar-review-ever...
Essentially, it says mint has better reporting tools (cute pie charts) but everydollar was better overall. 10 mins to set-up. Good luck @Benjamin Allen! You are asking the right questions. Figuring this out now can change your life!
I agree with @Frank Jiang of looking into using mint.com. I currently use it and I think that it gets pretty detailed considering its free. Its definitely a good start.
Also, a little exercise that might be helpful is keep a log for about a week or two of every cent you spend (no cheating!) After the two week time frame, review it and see exactly where you spent your money and identify areas where you could have saved money. Ask yourself, did I really need that Starbucks coffee or do I need to drive around in a Lexus?
The good thing is that you're only 23 so if you sacrifice your lifestyle so that you can achieve your budget goals that will later on pay off and allow for the lifestyle you want to live.
Thank you all so much you guys and girls, I've begun my budget and couldn't have done it without the help I really appreciate it. I should be able to get my 3rd property in no time at all. "Live like no one else now, so later on you can live like no one else later!"
Thanks again, God bless you all!
That is a really good quote, and I feel I pretty much live by that when it comes to my budget. My friends and family always seem to make a joke or call me cheap, but this is because I have a goal that others seem to not understand.
I do not dig to much into it with using a program or spreadsheet. I pretty much think and look at my money everyday though so I guess it is similar. I will sit down and set a goal for approximately 6 months and then a year. Then I break it down how much money a month I will need to save and how much I can spend. In the end I don't spend anything and I save everything. My wife hates it but I tell her one day it will pay off, and you and the kids will be thanking me. Well seems like you got it all figured out now wish you luck on your savings.
My wife and I have been using Google sheets for over 5 years now. We have a workbook for each year and and sheet for each month that tracks the daily balance and all of our income, and all of our bills. Early on this was the only way we could know when our 'low point' or 'right spot' would occur to the day each month.
Here is a sample workbook that is based on our budget that we still use: https://docs.google.com/spreadsheets/d/1pk9zi3cpw_...
It is very easy for us to access anywhere, both my wife and I can edit or update it. It is something we have developed over the course of the last 5 years, and are still constantly making changes. The basic idea is we know at all times what our primary checking balance should be for the whole month and at least a couple of months ahead. We a lot a food budget and a gas budget that are pretty fluid and loose, but I have that setup as a sub-budget within each month essentially, and as we use it up, we enter the line items in those areas to the right, and they show up in the ledger to the left on the date they are entered and the remaining portion of those sub-budgets shows up on the ledger at the end of the month so that our future month ledgers are still accurate based on what we project to spend.
Play around with it, enter some number and dates to see how it works. There are some formulas, so the ledger updates automatically for any item that you put a date in for. This has been our recipe for success so far. This is the first time I have shared a real sample of our spreadsheet, so I welcome feedback.
MY advice would be different then everyone else on here. Instead of pinching pennies on gas, coffee, whatever else (still be reasonable with your spending and don't buy things you don't need) start figuring out how you're going to make more money. Get a side hustle. Figure out something to sell, or a side gig that you can do in your spare time to make extra income. A side hustle can turn into a profitable venture over time and will accelerate your savings.
Do what this BP poster did:
https://www.biggerpockets.com/forums/519/topics/23...
I do. I pay bills by autodeduct or check. EVERYTHING else is paid by cash. Paying with cash makes you learn super quick what you spend on what.
The poster set limits for certain types of expenses and stuck to them.
Lots of good money books recommend this, including Your Money or Your Life.