Budgeting 101

Budgeting is one of my favorite hobbies. Does that make me lame? Perhaps. But it will probably make me rich someday too. There are some financially successful people who don’t budget. But they are rare. Most people don’t budget, but most people are also living pay check to pay check. I highly recommend budgeting no matter how little or how much money you are making. Every dollar you have and earn should have a name. Here’s a little intro course I’ll call budgeting 101.

Where to begin budgeting

There are several websites and apps that can help you establish a budget. I won’t get into those because I have never used one. I am sure they work well and that is great if that’s what you want to use. But I just use a good old fashioned spread sheet. On my spread sheet I have my expenses including fixed expenses, variable expenses, and sinking funds (I will explain what that is later) in different sections. Then I have a section for how much money I made or will make that month. I then assign every dollar I make to one of those expenses in one of those three categories.

Fixed Expenses

Fixed expenses: The goal for fixed expenses is to minimize them. These are the fixed “payments” we make each month. Most people in our society think they can afford something if they can make the payments. These people have a lot of fixed expenses. Some of the fixed expenses I have include my mortgage, my practice loan payment, my cell phone bill, electricity, Gas, water, insurances, etc. I don’t have a car payment or a student loan payment. You can’t every get out of some of these fixed expenses. But you can get out of the biggest ones. Once I pay off my my house and business my two largest fixed expenses will be gone. This will dramatically increase my ability to put money other places. My goal is to get those paid off as fast as possible and decrease my fixed expenses burden.

Variable Expenses

Variable expenses: These are things like kids clothes, or sports or other extracurricular activities. It could also be your eating out budget. There are a lot of things this can include. It’s basically anything that isn’t a fixed payment every month, quarter, or year. Some can be necessary and some may not be. But they aren’t consistent payments. You need to keep track of these well as they could change month to month.

Iy you can’t afford something within your budget, keep your wallet locked

Sinking Funds

Sinking Funds: These are funds you save for a certain large purchase. Perhaps you want to save for a nice vacation, a car, a house or house project, or some other large purchase. You may have a certain goal to reach before theses things are possible. You can put money away each month or how ever often you want, just for these goals. Then when you have enough money in this sinking fund you can go ahead and make the purchase with cash and without going into debt for them. This seems foreign to a lot of people. Why not just put it on a credit card and pay it off later right? Take out a 2nd mortgage or a HELOC? Well I would ask why not save first and purchase later? This will give you freedom and peace in your life.

I have several sinking funds. That way, I can make these purchases when I can actually afford them. Where are these sinking funds? I actually have a separate bank account for each one. It just makes it easier for me to keep track of. I suppose they could all be in the same account, but you would need to keep track of which fund has how much money yourself. Probably your most important sinking fund to have is a rainy day fund. Most people suggest you should have at least 3-6 months of expenses in a rainy day sinking fund that is very liquid.


Like I have said before, at least 20% of your gross income should go into retirement savings and wealth building. After that, the other 80% can be allocated to the rest of these expenses. That way, you are always living below your means. What if you have saved 20% for retirement and have enough for all of these other expenses and still have some money left over? Well, that’s a good place to be in. Spend it on an extra impromptu vacation, buy a boat, give it away, gamble, roll around in it on the floor. It doesn’t really matter if you have all of these other things done. However, what I would do is put it towards retirement financial independence. If I save more than 20% then I can reach financial independence even earlier. And that sounds good to me.

-Debt Free DDS

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*Nothing on my website is professional or legal advice. I am only sharing information that I have learned and it may or may not be accurate. I am not liable for any problems you may have by following this advice. Please do further research and get professional and/or legal advice about any of these topics. This post likely contains affiliate links. This site could be paid for clicks or purchases made through these links.

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