Tips for Resident Budgeting

Happy New Year everyone! I apologize for the late post, but I have been under the weather lately. No better way to start the year than with a gastrointestinal bug right?

I figured I would kick start 2019 by sharing my budgeting strategy. Why? I think in the grand scheme of financial well-being, you have to know exactly how much you have to work with. This is important for residents who stereo-typically have lower incomes, but naturally is also important to everyone else as well. A lot of people think budgeting equals hard work, stress, and relationship tension. But I want to show you how easy budgeting truly is with proper planning.

My wife and I use a simple spreadsheet that utilizes categories. These categories are designated a percentage of our combined incomes, sans rent and any recurring monthly expenses we have. You can see an example below.

By the way, this spreadsheet is for demonstration purposes and not the actual budget we live off. I could only wish rent in Boston was $1,000 a month! That is about the cost of a closet and bathroom around here.

Sample spreadsheet

Sample spreadsheet

The spreadsheet lets us know exactly how much we should spend on different things each month. Of course, the exact breakdown will look different for every individual and family. We cook a lot of meals at home to save money, so a good proportion of our money goes to groceries. However, I know other people would rather purchase meals, so a higher percentage would go towards eating out. You get the gist.

We also have a “personal spending” category that allows us to have some flexibility in expenses. It helps us not feel too constrained in life.

I really encourage you to create your own budget. To make the process easier, I made a spreadsheet that you can download, modify and use for free!

Tracking Spending

Ok, so now you know how much you should be spending. The challenging piece, of course, is tracking your spending and sticking to the budget. But it is 2019 after all. There are a variety of apps that can help you.

Computer Interface of Goodbudget

Computer Interface of Goodbudget

I have tried numerous apps, and Goodbudget is my favorite. It is a very simple tool that lets you create individual “envelopes”. Think of it as the digital version of taking cash out of a physical envelope. You can create an envelope for any category you want, which works perfectly with my budgeting spreadsheet. After you set up your envelopes, you manually add spending into the specific envelopes.

For example, if I spend money on groceries, I open up my grocery envelope, create a new transaction on my phone, and the appropriate amount is deducted. Below is a basic video tutorial.

Pros and Cons

Here’s the thing about Goodbudget. You have to enter each and every transaction on your own. For some of you, that sounds like a very painful process, especially given the fact that there are apps that can automatically track your spending. However, I think manual input is actually a very beneficial feature.

By making you enter transactions, Goodbudget (intentionally?) forces you to think about your spending. It also makes you are very aware of how much money there is left in each category. Hopefully, your active knowledge of your working budget prevents you from buying things you cannot afford.

Speaking of the apps that automatically track your credit/debit card spending. I have tried at least five different ones, and always found one very annoying problem - the apps would tend to categorize transactions wrongly. If I went out to eat at a restaurant, for instance, sometimes the payment was placed in my groceries or miscellaneous tab. I got tired of needing to check and then recategorize each transaction I made. I was doing double work for no reason. With Goodbudget, I have full control of how I define my spending.

Finally, Goodbudget is free if you use only 10 envelopes. You can also use it on up to two devices, so my wife and I both can add transactions on different phones. This is definitely a helpful feature.

In case you are wondering, I am not paid by Goodbudget, nor do I get any referral bonus from the app. I am just sharing this because it has helped my wife and I tremendously during my residency years.

Saying yes or no? (COpa Vida, San diego, 2018,  ©  JOEL ANG PHOTOGRAPHY)

Saying yes or no? (COpa Vida, San diego, 2018, © JOEL ANG PHOTOGRAPHY)

Credit Card Spend

One final thing I want to say. My current system makes me think about my credit card spend more like debit card spend. Each month, I know I have a set amount of cash that I can use for various categories. Once the money runs out, I have to say no to eating out, another glass of wine, or a nicer hotel on vacation.

As I have mentioned before, if you get a credit card, the most important rule is that you need to pay off your bills in full. If you use my budgeting strategy appropriately, paying off credit cards should not be a problem.

So there you go, my current budgeting workflow. I hope that was useful.

Do you have any personal budgeting tips to share?