Budgeting 101 for the Smart Shopper + FREE Budget Template

Do you think that it’s impossible to love shopping and also be a master saver? It’s easy to think that shopping and saving don’t belong in the same sentence. On the contrary though, with a well thought out budget and a few simple tricks to help you follow it, you’ll be able to prioritize saving while also allowing yourself the freedom to shop. 

For fashion lovers, shopping for new pieces to add to your wardrobe is just like shopping for any other “collectible.” You search for items that are missing from your collection, and spend money on those that you consider special and worthy of the investment. The key is to ensure that you are not over spending on your wardrobe.  Like any expense, the amount you allow yourself to spend on new wardrobe pieces comes down to prioritization.

Your first priority is covering all of your fixed expenses. Your second priority is ensuring that you are adequately saving for the future. Then, your discretionary spending can be allocated based on whatever remains. Discretionary spending is the first place you go if you need to cut down on expenses.

The money that you spend on your wardrobe is considered discretionary, along with things like dates, groceries, transportation, etc. You can allocate funds to your discretionary spending based on how important each of them are to you. For example, if you’re working to build your wardrobe, you might limit yourself to eating out only one meal a week in order to put money towards a new handbag. Ultimately, this is the area of your spending that you have control over and can determine where you want to spend more or less.

Now, let’s dig a bit deeper into how you can establish a foolproof method to managing a budget…

Establish your budget.

Start by recording all of your spending. You’ll have two types of expenses: fixed and living, and then your savings.

  • Fixed expenses – The expenses that you have every month that do not change. Fixed expenses include things like a rent or mortgage, utility payments, student and car loans, insurance, and cable/internet bills. To ensure that you’re living within your means, ideally your fixed expenses should be no more than 60% of your monthly income.
  • Savings – Once you’ve finished recording your fixed expenses, ensure that you’re prioritizing saving over discretionary spending. The amount you use for savings should be split between any investments, short term and long term savings plans you have established. At a minimum, this should account for 10% of your monthly income.
  • Living expenses – Your living expenses are the expenses that you must spend in order to live, but ones that vary in amount from month to month, or ones that you can control how much you spend. These types of expenses include things like groceries, gas, etc. These living expenses should be no more than 30% of your monthly income. 
    You can establish your “shopping allowance” from here, as long as you’re not exceeding the 30%. Your living expenses also include discretionary spending for things like dates or social events. Again, the total for all of these items should not exceed the 30% to ensure that you also have adequate savings.

Create separate checking accounts for easy accounting.

For me, the game-changer is establishing separate accounts based on their uses. Doing this makes it practically impossible to overspend, and also incredibly easy to account for all spending.  I’m a huge proponent of keeping your fixed monthly bills in a separate account from your living expenses. Doing so ensures that you cannot overspend discretionary funds or you will [literally] run out of money. My idiot-proof method of budgeting is to establish the following accounts:

  • Bill Pay (Checking) – to be direct deposited in a fixed amount and used for all fixed monthly expenses
    (*Semi-annual Bill Pay – if you pay any bills on a semi-annual basis, my preference is to separate that from monthly expenses. Again, it just makes accounting very easy.)
  • Combined Living Expenses (Checking) – to be direct deposited in a fixed amount and used for necessary spending (gas, groceries, etc.). These are expenses that Arnie and I both share. We usually include one date night in this account as well, and prioritize that into our week.
  • Individual Discretionary Spending (Checking) – to be direct deposited in a fixed amount and used for discretionary spending. Arnie and I call this our “allowance.” I like to shop, and Arnie loves his fantasy football, and we agree on a set amount that we’re comfortable with using on ourselves.  Having separate accounts gives us both some financial independence.

Phew! We made it!

Now, in case that sounds complicated, I’ve put together a template to help makes things a little easier. Click below to access the free library!

budget template for shopaholics-wellesley and king-@wellesleynking



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