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Budgeting is your most valuable tool for setting and meeting your financial goals. Having the right structure for your budget can make or break your success. Regardless of where you’re starting from (whether you’re rolling in dough or are so far behind you can’t even imagine a life without financial troubles), there are four essentials you must have in your budget. They are essential to life and for having success with your budget.
The Four Budget Essentials
We need to eat, it’s essential for our survival. So that’s why it should be your number one priority when it comes to budgeting. On average you can plan to spend about $7 a day per person you’re feeding. So for a family of 4, start with a budget of about $840 ($7 x 4 people = $28/day x 30 days in a month = $840). As you learn your eating and spending habits in the next few months, you can adjust this amount to match your true spending. Check out this post for more details on how to find your ideal grocery budget!
I do recommend that you exclude household supplies (cleaning, laundry, personal hygiene) from this category, at least as you’re starting out, so that you can get a clear idea of how much you’re spending on your food (and also on those other things) and plan your budget accordingly.
The next most important thing to add to your budget is a place to call home. You’ll need to include your rent or mortgage payment and any utilities you need to pay for (including trash pick up). If you’re a homeowner, you’ll also need to set aside a little each month to cover the costs of things like broken appliances, replacing things, or even just buying new light bulbs. You definitely don’t want to find out your heater has quit working or your roof is leaking and have no way to repair them.
You might not buy new clothes every month, but you should be budgeting for clothing every month so that when it’s time to replace your favorite pair of jeans or go back-to-school shopping, you’re prepared. Our family has really enjoyed getting our clothes through subscription boxes like KidBox, Stitch Fix, and ThredUp. Another box I haven’t tried yet but would like to is Kids on 45th, which offers second-hand kids clothes at extremely discounted prices!
I recommend budgeting between $450-$750 per person per year to start (about $40-$60 a month). You might also want to budget slightly more for kids since they are still growing and will need new clothes more often than most adults.
Whether you live in the big city or way out in the country, you’ll need a way to get around. If it’s possible and you’re able, try walking or riding a bike as often as you can. When it comes to transportation costs, you’ll need to include the cost of your vehicle, gas, maintenance (oil, tires, and normal repairs), plus the cost of insurance and license plate stickers. For those of you who don’t own a car, include any commuting costs you have (bus, train, taxi, etc).
Once you can cover these four basic essentials, how you set up the rest of your budget is really up to you. (If you’re struggling to even meet these most basic needs then don’t be ashamed to seek out help while you work towards getting back on your feet!) Deciding on your priorities (do you want to pay off debt, save money, make a large purchase, or maybe go on vacation) will help you focus in on where you should put the majority of your money. Whatever your goals are, put your money there and watch as you begin moving closer and closer to your best life! Keep working hard and making sacrifices when needed and you will see the rewards. Here’s to happy budgeting!!
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