Our last post spent far more time than I normally would on step 1.

Step 1: How much money do I have, and where is it?

Moving on to the rest now.  Again this is an example, you would plug your own numbers in for your own budget.

Step 2: What is my regular income?

I'm sort of self-employed with extra steps.  Amoeba Ink is a C-corp, but I'm the owner and only employee (I do pay some other people as freelancers for the publishing side of the business).  I set the company up this way with intention of growing and hiring more people.  It's probably not the best structure for most single person companies, but I do like having my business and personal money neatly separated.

There was a time where I was getting a full time salary, but these days I'm a part time.  My insurance and HSA deposit come out of my check as pre-tax items (this helps lower my tax withholdings), after taxes/insurance, I get $302.26 per month from Amoeba Ink.  I also have a part time job doing Wednesday night and odd time childcare at a church.  The biweekly check can range considerably ($41.97 to 157.22), but since we round down income, we'll use the lowest check.

$302.26 - Job One
+$83.94 - (41.97x2)
$386.20 - Regular Income

We're going to round it down to $386 for simplicity.


Step 3: What are my regular bills?

I can surive on this amount because I live with my parents, and I do try to earn my keep.  This step is where you would normally put things like rent, insurance, electric, water, internet, etc.  (This situation won't last forever, but it works for now.)

My only regular bill right now is my phone bill.  I'm on a family plan with my siblings, and contribute $42.50/mo to the phone bill.

$42.50 - phone
$42.50 - regular expense

If you round expenses, always round up.  So $43 in this case.


Step 4: What other expenses do I have?

This one is again lower for me that it might normally be because of insurance replacements.  Because of the way the insurance worked, we'd lose money on a lot of older items if we didn't replace them, so 2021-2023 I bought a LOT of new things or new to me things to replace all the stuff I lost.  I did just cash in a lot of things (didn't replace all my clothes or collectibles), so I have less stuff than before.  But it's all new stuff and won't need replacing for a while... for example I hate shoe shopping, so I just bought 3 pairs of the same sneakers that fit well and I'm still on pair #2.  New clothes (which I don't like as much as my old clothes, but they are new).  And I enough books to keep me busy for the next decade.

So for now...Gas and car maintainance, some toiletry items, and I tithe.  I fill up about once a month and my highest charge this year was $37.63 (rounded up to $38), I probably don't maintain the car I use as well as I should so I'll estimate $50/month (which is more than I usually spend but car bills can hit high when they hit), we'll be with $5/week or $20/mo for toiletries (for budget purposes a month has 4 weeks)...which may be more than I spend.  I tithe 10% of my net income, which means I tithe more when I make more, but we'll use the $386 for budget purposes.

$38 - Gas
  $50 - Maintainence
  $20 - toiletries
$39 - Tithe ($386/10= $38.60, rounded up)
$147 - Other Expenses

Your budget may have a lot of more categories than mine.  This is an area where looking back over reciepts or last years expenses may help you make more accurate estimates.  But these are areas that can fluctuate.

Step 5: How much should I save?

Let's see how we're doing.

$386 - Regular income
- 190 - ($43 Regular Expenses + $147 Other Expenses)
$196 to split between savings and entertainment

I want to stick to at least $100/mo for my IRA contribution.
I have a sufficient emergency fund, but because inflation is always a thing, I like to keep a trickle of money going into my EF, at least $5/mo.
I want to keep building up my brokerage fund, so if I take $10 out of each biweekly check that's $20/mo.

That leaves $71 ($196-$125) for entertainment money, which if I divide by 4 give me $17.75


Step 6: Do the numbers add up?

This step is just double checking your math.  (And I did make three math mistakes that I fixed cause I thought I could do this without a calculator.)

Summary:

Income $386

Expenses:
 $43 Phone
 $38 Gas
$50 Maintainence
$20 Toiletries
$39 Tithe
$190

Savings:
$100 IRA
  $20 Brokerage
 $5 EF
$125

Entertainment $71

$386 - $190 - $125 - $71 = 0

So this budget is balanced, but $17.75 is an awkward amount to pull out for spending money.  Since toiletries are an item I can easily pay cash for, I'll give my $20/wk and try to purchase soaps and such from that amount, but I'll have a little extra reserved in my account if I need it.

This is pretty much the budget I use.  I do have a betta fish, but at this point I can pay for his small needs from my entertainment funds.  If that caused a problem because I was over spending, I could move his betta water into expenses, but it hasn't been a problem.

This approach to budgeting is intentionally simplified, and it does work.  If you're trying to figure where the odd pennies go and what happens when I get a higher pay checks, then check out our posts on padding and unexpected income.