Never Worry About the Extra Cost of Guac Again 🥑
How to Properly Budget Your Paycheck
When I received my first paycheck, two thoughts ran through my mind. One: “where did the rest of my money go? (hello, federal and state income taxes 😕) and two, “l have my own money now, drinks are on me tonight!”
It felt incredibly liberating to be able to spend my money however I saw fit, but after two weeks I went from eating $11 avocado toast at Gracias Madre to sheepishly calling my mother and asking what she was cooking for dinner.
In between bites of Mom’s famous pastrami sandwich, I knew I had to do something to control my spending. I looked through my expenses from the past two weeks and realized that I had been to nine restaurants/bars, spending anywhere from $20 to $150 each trip. On top of that, as a responsible drinker, I had also spent $15-$30 in Lyft rides each night, meaning that I had blown over two-thirds of my paycheck solely on nights out.
Yep. Not sustainable at all.
Taking a step back, I separated my paycheck into three easy categories: my needs, my savings, and my wants. Next, I created a simple set of percentage guidelines for each category to ensure that I never get into this situation again.
50% Needs 💳
I started budgeting about half of my paycheck each month toward the things I absolutely needed. This included paying rent/utilities, transportation to and from work, my portion of the phone bill, groceries, and enough LaCroix to get me through the week.
50% is a large amount, but it is meant to be flexible because we all have different living situations. Some of us may choose to live in a large city with high rent to have the benefit of being able to commute to work on foot or by subway, while others may want to save money on rent by living outside the city but end up having higher transportation costs.
25% Savings 💰
After everything in my needs section, I saved a fourth of my paycheck each month. It has become pretty automatic for me to transfer 25% of each paycheck from my checking’s account to my savings account as the first thing after I receive it. I did this for two reasons:
- By allocating money into separate accounts, I don’t see as much money ready to spend in my checking account. This also makes it harder to accidentally overdraw funds.
- It feels good to know that I am making the conscious decision to grow my savings account to plan for the future a.k.a. being able to afford 20 French bulldog puppies in a five years.
The only times I’ve touched my savings are to pay off debt like student and auto loans, use personal investment apps like Wealthfront and Robinhood (Advo’s Brian Truong wrote a fantastic cheatsheet to personal finance 💵), for an emergency like flying out to go see a sick relative, paying to fix a broken laptop, or getting last-minute Coachella tickets.
25% Wants 💸
This was the trickiest category, as distinguishing clearly between my spending wants and needs would be the biggest factor in successfully managing my money. Like a lot of you, I’m guessing, seeing my friends’ constant Snapchat/Instagram stories of dope trips around the world or of dinner at drool-worthy restaurants makes most of these luxuries feel like they’re almost necessities. Sure, you should always remember to “treat yo self” once in a while, but things like a trip to Iceland, reservations at Nobu, and the newest Kylie lip kit should be firmly in the wants bucket.
However, there are other expenses that may seem like needs but are definitely not. Let’s take a look at this mini-quiz below:
- Should you get the Reese’s Cup that’s calling your name at the checkout line along when your getting groceries?
- Should you drop $5 at Starbucks every morning when you know there is free coffee at the office?
- Should you Postmates dinner even though you know you have leftovers in the fridge?
- Should you buy a fidget spinner? Or a Romphim?
If you answered “no” to at least three out of the four questions above: Congratulations! You are well on your way to becoming a financially responsible adult.
Parting Thoughts 🔑
These guidelines are not meant to be hard and fast rules to swear by, but are meant to be more of a starting point to which you can customize your own budget balancing guidelines.
No matter where are you are in life or what your work situation is, it will take time to start incorporating these basic ideas into your spending and make balancing your budget a habit, so that you never have to think twice at Chipotle when they remind you that guac is extra.
Hit 💚 If You Like Guac! 🥑 (and this article)
I’ve joined a new publication, Advo, with the goal of giving millennials well-researched, unpretentious advice for thriving in the real world. Want more? Come join the party at: Medium | Twitter | Instagram
Have any questions about my guidelines or suggestions on how to help improve them? I would love to hear from you in the comments section.
Have some extra dough to buy new shoes? Here’s one of our articles on how to buy penny loafers: