Tips to Create a Budget

Some expenses can catch a renter by surprise such as: deposits, insurance, utilities, furnishings, laundry and even entertainment. If not planned for, these hurdles can add up quickly and add stress to your life. It can, in some cases, cause significant changes to your independent lifestyle.

One way to help you over the money management hurdle is a budget. A budget will help you understand how much money you have, where it needs to go and where it is going. By creating a budget and sticking to it, you can better adjust for these unexpected costs in life. Financial experts recommend not spending more than 25% - 35% of net income on rent and utilities combined. As an example: the average rent for a one bedroom apartment in Sioux Falls, SD was $730 in 2020, 30% of $2400 monthly take home. Here are a few basic steps for creating your first budget.

Your Current Cash Situation

Determine your cash on hand. Do you have enough saved to cover the one-time costs? To do this, calculate your monthly income. Make sure to account for all possible sources of income (second jobs, donating blood, etc.).

Mandatory One-time Expenses
Determine all those one-time expenses which may include rental deposits, pet deposits, moving expenses, student considerations, utility hook-ups, etc.

Mandatory Monthly Expenses
It is important to separate the items that you "need" from the items you "want". Things like cell phones and cars require significant cash flow injections on a daily, weekly and monthly basis. Below are some items that we put in the mandatory expenses:

• Figure out what you need to sustain a healthy lifestyle. (Don’t forget to feed the pet!)
• Water, sewer, heat, electric, garbage, etc. What are you responsible for?
• Transportation: how do you plan to get around?
• Clothing: estimate laundry expenses and career clothing
• Insurance: consider renters/auto/life and health insurance
  
  

Lifestyle Monthly Expenses

Here are some items that could fit more into the "want" vs. "need" expense categories

• Cell Phone: smart phones require a data package on top of the monthly service
• Television: depending on the cable package, you’re probably looking at a minimum of $50 per month
• Entertainment: dining out, movies, concerts, video games, Starbucks, vacations and even sporting events are an important part of living but can really add up quickly if not budgeted for.

What’s Left?

So now you have figured out how much is coming in and going out. Hopefully the remaining total is a positive number (and the further away from zero, the better!)

If your total is a negative number, you will either need to borrow the money, cut some costs, or save a little more before you make the move.  

The bottom line is that most people, without budgets, build up debt. It's easy to spend money quickly on things that we "want" vs. things we actually “need”. A solid budget can help you plan for growth while maintaining the lifestyle that you desire.