It was 2006. College student by day, bartender by night. That was my life. If you have ever worked in the food and beverage industry, you can relate to the whole “I’m starting to feel like a vampire” syndrome. So anyway, I was working to pay for school and to put some extra money in my pocket. And it was working (seriously – even at less than minimum wage, tips add up). After a while, realization set in. I needed to manage my finances. I had just received my very first credit card (see why choosing your first credit card is more important than you think) and wanted to maximize my income. There was one problem. I had no idea how to create a budget. Don’t get me wrong, I was in school, learning all the things typical of a Finance Major (go figure). But somehow, calculating the present value of an annuity didn’t seem to be relevant to someone just starting out in life. I just couldn’t find a course that could teach me how to manage my finances in the real world. There had to be an easier way.

Leverage Opportunity

People in college seldom take advantage of the discounted services that are available to them. I was able to find a program in school that allowed me to take an advanced excel modeling course for $100. This same program was available to professionals for $5,000 (for those of you still in college, check out these tips on how to take advantage of the discounts available to you). The way I figured, this course was not going to teach me how to budget my finances, but it would lay the foundation that would eventually allow me to use Microsoft Excel like a pro.

Income & Expense Alone Just Doesn’t Cut It

Once I had taken the training, I began experimenting with creating what would become my very first budget. I opened up a spreadsheet, started putting down my income and then my one little credit card expense and a phone bill. I thought to myself “this can’t be it”. There had to be more to this. What about when I get a mortgage, rent an apartment, another credit card, savings, investments, open my own business? I had to set up a template that I would be able to use for the long term. So I began putting a list together, even if I didn’t have certain types of income or expenses yet:

Primary Income

This would be your net pay (after taxes). Eventually, this is something that should grow, so a forecast of various income levels would be helpful (i.e. if you’re making $30K today, how would this budget look if you made $50K?).

Other Income

If you have another job, rental income, your own business, etc. this is where you would enter that income stream. Some of this income may not have taxes taken out until you file taxes (i.e. rental income). It’s important to be aware of tax responsibilities at the end of the year. The IRS provides tips on how to handle rental real estate income.

Expense Type

Living Expenses – Rent/mortgage, utilities, groceries, transportation, insurance

Consumer Debt – Retail credit cards, bank credit cards, personal loans

Business Debt – Retail credit cards, bank credit cards, business loans (see how you can increase your buying power with business credit)

Misc. – I usually keep a bi-weekly expense category for certain items that I know will be spent (can’t forget about that morning coffee!)


IRA – tons of options out there     (Betterment, Wealthfront, FutureAdvisor, Charles Schwab, etc.)

Savings – traditional banks, online savings (Nerdwallet has a great review of Barclay’s online savings program)

Special Occasion Fund

This is going to be different for everyone. For example, this would include funds I set aside for holidays (budgeting for Christmas is something you will never regret!), birthday gifts for my kids, anniversaries, you get the picture.

Emergency Fund

A good rule of thumb is to have enough funds set aside to cover six months’ worth of your expenses. If you’re a homeowner, your goal should be to have at least one year’s worth of mortgage payments (a difficult thing to achieve but necessary to aim for nonetheless).

Net Income

You reach your net income after taking all of these expenses, savings, investments, and funds into account. If you are creating a monthly budget, it’s important to keep a running track of your previous and current month’s net income so that you are aware of your cash on hand at any given point.

Not One Size Fits All

Budgets are a dynamic concept editable to each individual’s personal circumstance. While the above can be applied to many individuals, it’s important to tweak when needed. Also, remember funds for your 401K and health insurance are typically taken from your paycheck, so no need to include in your budget.

For a deep dive into how I have automated and enhanced my budget to include credit related metrics, look for my online course.

So, what do you think? What was your first experience in creating a budget? What were your main issues? Feel free to comment below (moderation is the enemy!)