Budgeting 101 for the Modern Woman + a 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, a well thought out budget and a few simple tricks to help you follow it can enable you to prioritize saving and give 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 anything else you spend money on, the amount you allow yourself to spend on wardrobe additions comes down to prioritization.

Financial Priorities

Depending on which financial expert you like to follow (I have personally loved Jean Chatzky for ages), they may recommend prioritizing your financial goals differently. For example, some say to work on paying down your debt as the number one priority, others say you need to establish a 6 month savings before paying down any debt. The truth is, everyone’s situation is different so it’s up to you to determine what makes the most sense for your circumstances.

That said, the first step to understanding your financial situation is by developing a budget, and I am a huge proponent of this. (My husband can vouch that ours is complete with pivot tables and pie charts #nerd, I know). For me though, I was brought up in a house where financial responsibility was drilled into our brains, and understanding where all of your money is going is so important when it comes to that responsibility. It’ll open your eyes to exactly where you can cut back on certain spending and where you can afford to save a little bit extra, depending on your personal goals.

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 50% 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 20% 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, gym memberships, 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 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.

Utilize auto-pay and direct deposit

If it’s an option for you, I highly recommend taking advantage of a direct deposit system and, if possible, setting up your direct deposits to go to different accounts. Depending on your employer, it may not be possible to set up multiple direct deposits, so if that’s the case for you, then determine if your bank allows scheduled automatic transfers.

The point is: automatically deposit the budgeted amounts into the respective accounts.

Automating your deposits and your payments is a game-changer. It ensures the appropriate amounts are always available in a specific account–separate from any discretionary funds–and that you’re never late on payments. This eliminates any and all stress when it comes to paying your bills. You won’t even have to think about it!

Automatic payments/transfers and direct deposits shouldn’t only be applied to paying bills. You can also utilize them to set up transfers into your savings account. That way, you never even see it as “available.”  Instead, it’s immediately out of sight/out of mind, which will allow your nest egg to grow over time. Even if you’re only able to save $50 or $100 a pay, at least start there. In the case of an emergency, you’ll at least have a small buffer to help you get through the setback.

Now, in case all of the above sounds a little complicated, fear not! 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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