Most ‘personal finance’ people might not like this one, but I do. Sometimes when you’re just starting out with budgeting it might be best to use the Padawan Budget (yes, I picked the name) to get started. You can also use it while tracking spending to create a more defined budget. It’s also great for people who are a bit spontaneous, don’t like constraints or just don’t have the time right now to make a more detailed budget.
What is the Padawan Budget? (wtf is a Padawan?)
The Padawan Budget is a very flexible budget; it consists of only your committed expenses, such as rent (or mortgage), utilities, renter’s or homeowner’s insurance, car insurance, car payments, phone bill, Internet and so forth. This type of budget isn’t really intended for long-term (a year+) use, unless you’re okay with and understand the potential drawbacks of not setting up a more in-depth budget. The Padawan Budget is easy and quick to set-up, that’s always a plus for those who are busy all the time.
How to Create the Padawan Budget:
1. Gather all your monthly committed expenses that you intend to continue. For example, using my own: rent, renter’s insurance, electric, water-sewer-garbage, Internet, cell phone, Netflix, the evil credit card, monthly fee for my oldest credit card ($3 a month, but it would really mess up my credit score to get rid of it), automatic transfer at U.S. Bank, ING transfers to cover car insurance (save to pay in full), automatic ING transfers to our Emergency Fund and video game subscription.
2. Make a list (or spreadsheet) of each item and the amount you must pay each month. Then add them all up and put the total below (or wherever you want).
Our Monthly Commitments:
Renter’s Insurance $17.00
Electric (averaged out over the year) $121.00
W/S/G (using the 1st bill still) $65.00
Cell phone $50.00
The Evil Credit Card (min.) $64.00
CC monthly fee $3.00
U.S. Bank auto-transfer $5.00
ING transfers to save for car insurance ($2 each day M-F) about $44.00
ING transfers to Emergency Fund ($1 each day M-F) about $22.00
World of WarCrap (needs updating to GameFly) $17.00
Total: $1,310.00 or $655.00 every paycheck (for bi-weekly or twice per month)
3. If you only get paid once per month, then you don’t really have much of an option. If you get paid twice monthly or bi-weekly, you can split the total and make payments or save for them each check. I pay all our bills except for rent and renter’s insurance each paycheck and set aside the money for those two each paycheck so I’m covered. Decide how you are going to take care of the payments.
4. What’s left-over after paying all your commitments is what you have to spend on for all the other stuff, such as: groceries, savings, gas, entertainment etc. So if you spend too much on groceries, then you need to work on spending less on other things until you get paid again.
I told you it was easy. It’s obviously not the best way to budget your money but it helps you better understand and remember what things need to be paid. It’s also great to use while you’re tracking your spending (like I’m currently doing here and here) so that you can get a real picture of how your budget needs to be structured. Just make sure you pay your commitments first and on time, not paying on time can lead to late fees, damaged credit scores, raised interest rates and other nasty stuff.
Just remember, this budget isn’t for everyone and more than likely isn’t the best long-term budget but it can definitely help you get started. Need a step up from this kind of budgeting? Maybe you should check out the Jedi Budget.