Budgeting 101 | Brittany Andrews | Skillshare
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12 Lessons (28m)
    • 1. Introduction

      1:45
    • 2. What is a Budget

      1:24
    • 3. StepOne

      1:25
    • 4. StepTwo

      4:30
    • 5. StepThree

      2:24
    • 6. StepFour

      5:31
    • 7. StepFive

      3:03
    • 8. Maintaining Your Budget Option 1

      2:20
    • 9. Tip

      1:50
    • 10. Maintaining Your Budget Option 2

      1:48
    • 11. Maintaining Your Budget Option 3

      1:11
    • 12. Closing Remark

      0:47

About This Class

This class is intended for anyone that isn't quite sure how to get their finances under control. Wether looking for simply a start to financial freedom, or looking to remove debt, this class is for you!

Transcripts

1. Introduction: Hi. My name is Brittney and I am a financial planner and the owner of Britney's bookkeeping. I help individuals and business owners plan for their future. This essentially covers topics like day to day, cash management, retirement, investment and estate planning to risk management and business financial planning. I've been in business since 2015 and have taken on various clients from all industries and walks of life since then, just to give you a little bit of the back story. I graduated from a university in 2010 with a bachelor's degree. Education and numbers is always has been a passion of mine. And since graduating, I've made my education my own. Which brings us to No, I'm excited to begin this journey with sculpture and pass along all my knowledge I've gained over the years. This class, my first class is budgeting 101 Everything you need to know to start your journey to financial stability. This class is for beginners and those that are looking to make a fresh start on their budget or to gain a new perspective. You know, if you've ever found yourself struggling to figure out where all your money went and why there isn't enough in your checking account to fill your gas tank. Or if you simply want control over your finances, this classes for you. So in this class, I'm gonna touch on the difference between creating a budget. First living by a budget, you're gonna learn how to categories your expenses and how to organize them to allow for easy daily maintenance. So if you're ready to learn how to reach financial stability with just a few simple steps, then enroll in this course today I look forward to seeing you in this course is dashboard. 2. What is a Budget: So what is the budget, the dictionary definition of a budget? Is this an estimate of income and expenditures for a set period of time? That simply means that a budget is a plan for your finances for a specific amount of time. Now I want to point out here that I said the definitions specified a set amount of time, which does not translate to forever. You can't just set a budget and walk away from it. A budget is something that needs to be updated continuously. It's, Ah, rotating result of trial and error. We used this document for lack of a better word to track what we have coming in or income in and what we have coming out our senses. Essentially, we place these two things income and expenses and compare them side by side, hoping for remaining balance or a surplus. Budgeting is one of the most important things that you can start today to change your future and to put you on the path to financial stability. Budgeting helps you figure out where your money is going every month, and it gives you complete control of your financial future, allowing you to make your own adjustments when necessary. In. That is what budgeting is all about. 3. StepOne: another in many ways to start a budget. Some people just dive right into a software or an add on on their bank website, or they plug in numbers in an Excel sheet. I spend about this on rent this on utilities, etcetera, etcetera. I don't recommend this haphazard way of budgeting. For one, it's not giving you a realistic picture. And for two, it will leave you with more work in the long run when it comes time to update and you realize nothing was correct in the first place. That being said, I recommend you set aside some time in your schedule to do this right to prepare yourself for this first step. Erica. Men, you get everything you need beforehand. Don't worry, though. It's simpler than you think. All you need to start your budget is to number one make or have copies of your bank, credit card and loan statements, as well as copies of your last three paychecks and number two. Open up a fresh excel, she on your computer or pull out a sheet of paper and a pen and number three. Lastly, open up the calculator app on your phone, or if you actually have a computer dusted off and set it on your desk. Once you're prepared, step two will be a breeze. 4. StepTwo: So here's where we get into the meat and potatoes. We're gonna start with the maid of scenario. Here's Jo Jo was overwhelmed with his money situation and decided that he needed to start a budget. He followed Step one and is now ready for Step two. So first things first. We have to analyze what money Joe has coming in each month now. Sure, we could do this week to week or bi weekly to bi weekly, depending on how you pay your bills and where you are in the process. But ultimately, I find it's easier to stick to a month to month. As you know, many companies like to get paid monthly, so sticking to the same plan provides uniformity and clarity. So, Joe, he's married to a woman named Sally, and they have two Children. Now, to keep this example simple, we're only going to talk about earned income. Earned income is money received in cash or kind for wages, salary and commissions in exchange for performance of services by the employee. So income from an employer we're not gonna include unearned income, which includes dividends and interest, lottery winnings, royalties, cash, gifts, etcetera, etcetera as you will see these steps will work with under an income. But I want to make sure you can crawl before you walk. As in, you get the basic concepts before you include monies that are unpredictable. Okay, so back to Jo Jo's a garbage man and is paid $1504 in 67 cents bi weekly. In most months, Joe will receive a check to times, so we multiply his $1504.67 by two to get a total monthly income up $3009.34. Now, I want you to notice something here. You can choose to keep his total income at the $3009.34 or you can choose to round his income to the nearest $10. I like to round the numbers to create uniformity. So since this number is only $9.34 over 3000 I'm going to choose to round down. We're going to say that his total income is $3000 a month. In analyzing your income, you'll realize that such a small change will not affect your numbers enough to change the results. And on top of that, if you round down, you'll end up with extra money each month, even if it is only $9.34. Okay, so next step Sally Sally has a part time job as a florist, making $12 an hour now because Sally has a part time job and doesn't make a specific amount per month, we're going to find an average of Sally's last three paychecks from Sally's Patrick's. We see she worked 20 hours during the first pay period, 28 hours during the second in and 26 during the third. We then get the average by adding those three numbers together in dividing them by three, giving Sally an average of 24.67 or 24 rounding down a week. Now, I want to point out that there are some once where this average isn't going to work. Sally isn't going to get an average of 24 hours, but those are months where you make adjustments. But for now we will move forward using this average. Okay, Next, we're gonna multiply 12 by 24 to get Sally's average pay per period, which is 288. Sally gets paid once a week. Some multiply the 288 by four, typically four weeks. In a month you get 1152. We then take Sally's income and add it to Joe's income, leaving them with a household income Ah, 4152. And so now we finished up to, and we're ready to move on to the next step. 5. StepThree: now to their debt. This is where you want to pull your credit card statements and loan statements to the front of your preparation pile. We're going to start smallest to largest, and I want to keep this somewhat realistic. So we will say that Sally and Joe have a total of three credit cards. Card number one has a balance of 500 on it. Well, say, with a minimum payment of $25 a month. Car number two has a balance of 900 with a minimum of 25 a month, and card three has a balance of 2000 with a minimum of 30 a month. Add those up quick. We get a total of $3400 credit cards with a total minimum payment of $80. So next up, still working, smallest to largest. We will say that Jones Ali have one car payment to cars, one not so great e and the other one new, which they owe $15,000 on. It's a nice car safe in big enough for their Children. The minimum payment for this nice, newer car is $300 a month now to keep this simple. I decided to forego the complexities of the mortgage and just say that Joan, Sally or renting Now that being said, you can still use this example. If you do have a mortgage, a mortgage is just like rent. It's usually a set cost each month. Very rarely does it change unless you know, let's grow. But for this example, simple. With that, let's add up Jones alleys debt. We take what they owe in credit card debt, plus what they own the newer car, leaving them with a debt balance of $18,400. Keep in mind that you will be constantly updating your budget, so interest isn't something you necessarily need to worry about. Lastly, we're gonna add up these minimum payments, giving us a total of $380 that needs to go towards debt each month. Now that we got that figured out, let's move on to step for 6. StepFour: Okay, now Step four is a big one. We're moving on over to expenses. I like to put it cleanses into two categories. Your needs in your once. We're going to jump right in and start with what's most important needs. First up, rent. Joe and Sally pay $1500 in rent. That's a little reference in my area that won't get to a one bedroom apartment. But in the suburbs where Joe and Sally live, that gets you about a three bedroom in a multi family house or complex or a small house. Okay, next, Jones Alley have renter's insurance that runs them about $25 a month. Next, we have electricity to keep things simple will say that they haven't all electric apartment or small home, and the average out about $150 a month. Now here you want to take a glance at your bank statement and see how much you've spent on electricity in the past few months. If you find that it fluctuates quite a bit, you want to get a number that's less the average and closer to the higher amount. You want to make sure that you can cover this expense, and frankly, it's better to over budget than under budget. Okay, so next cell phones Jones Alley got themselves a good family Plan E and pay $100 a month for three lines. Only one of their kids is old enough for a cell phone. They're also cutting corners and realize streaming is the new cable. So they forego the cable just for the Internet, which is 80 a month. They don't have the best plan. Next up. Groceries. When I say groceries, I mean anything that's consumable food, drinks, paper plates, toilet paper, cleaning products, dog food, etcetera, anything that gets used up in replaced. That being said, this is another one you're gonna have to dig into your banking credit card statements for you want to make sure you end with a number that feels like you can cover all your expenses each month. Now this might be a little off. I don't have Children and only shop for two people and a small apartment with one dog. But we're going to give them and their kids $550 a month for groceries. Next up, all their vehicle expenses one being car insurance for the two cars. They pay $210 a month in gas running, under the assumption that neither have a very long commute and somewhat fuel efficient vehicles. We're gonna put them at $300 a month, and lastly, let's throw in those car payments of $300 a month. And while we're on debt, let's get those credit cards in there. If you recall, the minimum payment for all three cards was $80. Now you may say I missed some things like health insurance. But in this particular example, Joe, being a city employee, has his family health insurance taken right out of his paycheck so it won't come into play here. But if you have to pay for insurance separately added in. Okay, so now you can see all the needs of Joe and Sally's family are covered. No, it's add up Joe and Sally's expenses thus far, giving us a total of $3295. So take that number and subtract it from the original total income of $4152. You get a remaining of 857. No, this is an ideal. An ideal situation would have put these needs at 50% of Joe and Sally's income. But as you're aware, in the real world, not everything is ideal. So next up we want a budget Joe and Sally's Once. There are three primary types of wants within this category. Number one entertainment to include hobbies. The movies. Purchasing a new video game, etcetera. Number two shopping. This section can also include that video game that you want to purchase. But for most, this section consists of clothes or a pair of new shoes, and number three is dining out to include Date and I or a family outing. No, these are wants a category that is completely under your control. You can choose to put however much, or however less, in this section. So for Joe and Sally, we will give each category $100 a month. Sum this up. Joe and Sally have budgeted $3595 off their $4152 towards their expenses, leaving them with the remaining $557 which we're gonna take over to step five 7. StepFive: all right, so next we get into savings or some call it the rainy Day Fund. Now, this isn't something you necessarily have to, but it for, but I 100% recommended. This section of your budget will cover the stuff that isn't necessarily planned for. For starters, healthcare, though the entire family may have health insurance. Insurance doesn't cover those pesky deductions, or you might have co pays. So for Joe and Sally's budget, we're going to set aside $50 Next up cars. Cars are also trouble, some sometimes, and in this case, the family has one older car, so they set aside $150 for car maintenance. This includes registration fees and oil changes and a possible replacement down the road. You never know in Christmas, and birthdays always jump up quicker than expected. So we set aside another $100 a month for that. And while we're at it, family vacations, family vacations are fantastic. So Joe and Sally set aside ah, $100 for that as well. Depending on your savings goals, you can also take the time here, too delicate money to your retirement fund or a child's college fund will set aside some here calling it a long term fund, and we'll put $100 in it. So let's add in these rainy day savings, if you go back a little, you'll remember that the remaining balance after subtracting their needs and their wants from their income was $557. And we take that, do some quick math $500 for the rainy day expenses, and that gives us a remaining $57. Normally, this would be where your budget would end. This last savings category would be where you would dump all your extra money that didn't fit into your expenses. But in some cases you may choose to use this extra money to pay off debt. So still, using Joe and Sally as an example, we have the remaining $57 left unbudgeted. If you remember, the lowest balance of one of their carts was $500 which means what you can now take that additional $57 add it to the minimum payment of $25 leaving a total apply to that credit card of $82 if they're able to keep this up or even possibly consolidate some of their spendings. They'll be able to get this credit card paid off in just a few short months. And what do you do? After you pay off the $500 balance, you move onto the next credit card, slowly chipping away their smallest step first until one day they find themselves step free . Now that's budgeting at its best. 8. Maintaining Your Budget Option 1: Okay, so you've gone through all the steps, analyzed all the data, and you have yourself a working budget. That's it, right? Nope. This is where you lose a lot of people. In successfully using a budget, you have to do more than just simply put income and expenses to paper. You have to maintain that data. A huge part of budgeting, or rather, the most important part of budgeting is keeping track of your expenses, as in keeping a running tally of every dollar you spent in these next sections, we will talk about a few options. You have to keep track of these expenses. First up, we'll talk about what I call the old school option, using a spreadsheet or pen and paper for those that use a trick book on a regular basis. This won't be a difficult concept. You simply write down every dollar you spend on a daily basis and a designated chart. For those that, like pen and paper, this is an ideal option. You can keep track of each transaction in a journal or a planner that you carry around in your purse or in a small little black book. For those that don't carry around a purse in use pockets. You could make this a simple or as complicated as you'd like. You can start with listing your categories, and every time you spend money, place that expense under that specific category and subtracted from the total previously allocated for that category. So an example. You have, ah, $550 budget for groceries. You go to the grocery store and spend $135 on a week's worth of consumables. Remember when I said groceries? I'm referring to all the things you can use and replace, so you pull out that notebook journal are planner and go to the grocery section and subtract $135 from the $550. Be sure to write in your remaining balance. You don't have to do this on paper. You can use an Excel she on your computer as well. You can follow the same idea as you would on paper, or you can make it complicated by adding formulas in creating charts. There is no wrong way as long as you're tracking the data and reflecting the expense in the correct category. 9. Tip: they just want to insert a tip here. If you get to a point where you spend two months in one category and have to find somewhere to pull money from to replace it, I want you to pull that money from within the same months. Budget, Not next month's. For example, we use the grocery category again. You've already spent $135 but there isn't enough to feed your family for the entire month, so you have to make an additional trip. So the following link you go and you spend another $150. In the week after that, you spent 100 $30. Then you decide you want to plan. Ah, huge family dinner for your extended family. So you go out again and spend another $120. During that third week, you're at a total of $535 but you still have to go to the grocery store next week, the last week of the month. But you only have $15 so you go to the store in the last week. Try to be frugal, but you still end up spending $115. So that's $100 you don't have in your budget that most people would say. I'll just pull from next month's budget and shop light. But something usually comes up and you're not able to cut back. And so you're borrowing again and again from the following month, and then you're on a perpetual cycle of always being behind. This isn't the best practice. So what I recommend in my tip to you. It's not pulled out money from next month. But pull that money from another category in that same month. You can choose to pull that money from any of your wants categories, like dining out or entertainment or shopping. Those things are easier to say no to them putting food on your table. 10. Maintaining Your Budget Option 2: Okay, So back on topic, a second option for keeping track of your expenses on a daily basis is to use an app. Now there are hundreds of different apps out there that you can use to track your expenses . If I was going to pick any to give recognition to, I would recommend wine ab government. But in reality, most of these APS do the exact same thing. They allow you to create categories to fit your exact needs and allocate your income to the exact dollar. If you need to move any amount across accounts in the same month, it allows you to do it with a click of the mouse or with a swipe of your finger. If you like the freedom toe walk out of your house, carrying on Lee your keys, wallet and phone. This option is best for you. No need to look for a pen. You can simply open the app and record your transaction right at the cash register. It's the ideal option for comedians, but I must point out, in some ways he zaps or too convenient. 95% of those applications allow you to sink your accounts. Bank accounts credit cards, loans, etcetera, all easily imported directly to the app from your provider. This in itself dismisses the urgency it's done for you. What's the point of taking the minute to do it? I want to say again. The most important part of budgeting is tracking your expenses. So when you allow an app to input all of this for you, you lose that daily contact and slowly you lose control of your budget altogether. So before you use this option, think long and hard. 11. Maintaining Your Budget Option 3: and lastly, the third option. The envelope system. This system incorporates some of the same principles as a spread. She option. You're putting pen to paper and recording things as you go, but there's one small difference in depending on the size of your notebook you choose to carry. It may be significantly smaller. Envelope system is just that. A system that uses envelopes to keep track of your spending. This option can also be a simple or as complicated as you want it to be. You can carry around an envelope for each category or just in envelope for needs to include your groceries, fuel expenses and then a second envelope for your wants. However many envelopes you choose, you use a specific envelope to record each transaction into also store your receipts. For that transaction, it can be seen as a win win. It all depends on your preference. When you decide which options to choose, consider what appeals to you the most. Compare the options yourself. Whether you're carrying around a notebook, a pile of envelopes or your smartphone, be sure to pick the one that you're going to stick with 12. Closing Remark: Now that you've run through this course, I hope you have a new understanding. Budgeting isn't too complicated. It's simply about taking the time and sticking to it. You might not get it perfect the first time, but budgeting is all about trial and error. Start with what you think will work. If it doesn't adjust next month. There isn't a concrete set of rules. Give yourself permission to roll with the punches. This is a learning experience and you never know. If you aim low, you might find that you can get that bang for your buck if you just try to conserve. Thank you for sticking with this class. I really hope that you enjoyed it and that you learn the fundamentals necessary to start budgeting today. So goodbye for now. And I hope to see you in future classes.