Managing Money

No matter your situation, a budget is a necessary tool to make your money work for you and not against you. However, not everyone has experience with budgeting. You may have made some smart choices already, such as choosing a great apartment community like Williamsburg North that has amenities included with rent. But instead of relying on a few “tricks,” it’s much better to make a budget and stick to it. Check out these simple steps to get started. 

#1: Figure Out Your Net Income

This is a vital step to starting your budget. You may be tempted to take your salary and divide it by 12 to figure out your monthly income or your hourly rate and multiply it by your monthly hours. However, that does not take into account money deducted for taxes or employer-sponsored retirement plans and/or health care insurance. 

To calculate your net income, you’ll need a recent pay stub. This will help you see how much and what is being deducted from your paycheck. What’s left over after these deductions is your net income. 

Tip: You may want to keep a note of how much is being deducted for things like retirement and insurance in case you have the option to choose a different plan that may save you money, like if your partner has a better insurance plan from their employer or if your retirement contributions are higher than necessary for your financial goals. 

#2: Categorize What You Spend

Many financial pros will tell you to divide your spending into three categories: wants, needs, and savings/emergencies. This will give you a clear starting point for building a sound budget because there’s a clear distinction between wants and needs. 

In case you’re thinking that wants and needs are actually a little difficult to differentiate, then here are some basic lists to help you. 

Needs

• Rent or mortgage
• Apartment insurance/homeowners insurance
• Health care insurance and medications
• Car payment 
• Groceries
• Utilities
• Gas
• Any other regularly recurring bill that relates to ongoing needs

Wants

• Dining out
• Shopping 
• Movies/plays/ballets etc.
• Coffee 
• Cosmetics/extra toiletries
• Any expense that does not relate to your basic needs

Savings/Emergencies

• “Rainy day” fund for sudden/unexpected expenses
• 401K or other retirement fund
• Investments
• General savings

#3: Put It All Together

After you have your net income and spending categories, it’s time to dig into some math! You can use the tool of your choice, even if it’s some paper and a pen, but you do need to use something to record everything. There are plenty of online templates, and How to Geek has a great article on building a budget with a spreadsheet. 

If you want to do the math on your own, then you start with your net income and deduct the money you spend on needs, wants, and savings/emergencies. This will show you where your money is going. If you’re not sure how much you’re spending on your wants, then an easy way is to take your bank statements from the past three months and average what you spend. This will at least get you started. You can always revisit this number at some later date. 

#4: Set the Budget–And Keep It

Your numbers are all calculated, but now comes the hard work. What do you get to spend on each category? There’s another good rule recommended by financial experts and institutions, including Bank of America, and it’s called the 50/30/20 budget. These numbers are percentages you should use for each category you’ve created. Plan to spend about 50% of your net income on needs, 30% on wants, and 20% for savings/emergencies. 

You’ve got your monthly expenditures and a plan, so all that’s left is to follow it. To hold yourself accountable, check in with your budget at the end of each month. If you’re doing well, you can check in quarterly instead. And if you find yourself with a large surplus, use most for savings/emergencies, but be sure to enjoy your hard-earned money once in a while with a special treat, like a nice dinner out or a weekend vacation. 

Do you want to live in a place that includes budget-saving amenities? Take a tour at Williamsburg North, apartments near Keystone in Indianapolis. Our resident amenities will help you save! We have a swimming pool, 24-hour fitness center, on-site maintenance, and on-site laundry facilities. We are ready to welcome you home: (317)-648-5854.