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Welcome to Real Life

Welcome to Real Life

I always thought that I was good with money. I knew when my bills came out of my account, I knew when my credit card payment was due, and I saved a little every month for a rainy day. Being 20 years old, I thought I was in good standing. When the OSAP cuts came, I went into financial shock. My funding had been cut by roughly 65%. I realized very quickly that I could predict my money needs in the short term but had trouble trying to predict my needs long term. As an accountant in training, I was embarrassed that I was so clueless about budgeting. So, my new years’ resolution was to create a budget for the year and stick to it.

Since I’m a business major, I used an excel (obviously) to do my budget. Excel has an aesthetically pleasing “Personal Budget” template that I used and found incredibly helpful. [This template was coincidentally made using the H&Co. colors – not relevant, or is it?] However, you can use whatever format works best for you – may be a word document or even good ol’ paper!

Here is a little step by step of a super basic budget:

1) Income

  • How much are you paid and how often? OR If you run a business, how much do you pay yourself and how often?
  • Once you have figured this amount out, take it and put it into this formula (Pay$$ x How Often) / 12 month. This is how much money you have coming in every month.
  • This step seems complicated but don’t worry, it isn’t! For example, you earn $500 every two weeks. Since there are 52 weeks in a year, you would have 26 pay periods. This formula would look like this: (500 x 26) / 12 = $1083/monthNote: We need to do this step to get the average income for the month. Sometimes, for example if you are paid biweekly, there are 3 pay periods in the month. We don’t want to see the extra income and just spend it as we see it – we want to plan what to do with that money.

2) Expenses

  • This part is easy, list all your expenses. I like to list my regularly recurring bills first. These can include mortgage payments, car payments, insurance, cell phone bill, etc.
  • Next, I list the variable “costs of life.” How much do you spend on groceries a month? How much do you spend on gas a month?

3) Savings

  • Now, we can decide how much we would like to set aside every month for savings. Even if you are young, it is important to get into the habit of putting money away to prepare for a “rainy day” or an emergency.
  • You can pick which way you’d like to list your savings. You can list them by account, or you can list by what the money is for. Are you saving for a vacation? How much a month do you want to put aside for it? This is a perfect time to think further into the year!

4) Weekly Allowance

  • For me, this was the most vital step. To me, it felt like I was spending minimal amounts of money throughout the week but this was hardly true. The $5 transactions add up quickly throughout the week!
  • In this step, use this formula: [Income-Expenses-Savings]/52 weeks = $$ to spend each week. It is easier for me to work through my money a week at a time but if you prefer every other week or by month, you can adjust accordingly!

I also found that if I don’t spend my entire allotted weekly allowance, I can tack it onto the next week or plug it into savings. Furthermore, it is easy to adjust your budget whenever you need because maybe your car died on a random Tuesday – we all know how life can be. After going through this exercise, I find that I have way more control over my finances and have a sense of security knowing exactly where my money is going.

Being so young, people my age teased me for doing something so “adult.” It’s all fun and games, but I’ll let you in on a little secret, money has no idea how old you are or what stage of life you’re in. Most importantly, money doesn’t care. Money is a part of life. We need it to get basic needs like food, shelter, water, and education. We also need money to obtain luxuries that make life worth living like coffee, sponge toffee, books, and plane tickets.

Don’t let your money own you. Own your money. But please, remember to have some fun because life is not all about money. Sometimes, it’s about planning a trip to Cuba!