By: S. Spells
Budgeting can be hard for most people but that is ok! Even I used to struggle sometimes with budgeting my own money. Before we can get into how to budget you must know what it is. A proactive method of managing your finances is by creating a budget. A budget ensures that you have more money coming in than going out by keeping track of your income and expenses. This enables you to budget for the things that are essential to you, pay for your living expenses, and make short- and long-term plans.
We are going to start off with 8 basic steps that helped me begin budgeting my money the correct way!
List the things you cherish. Put your values in order after writing down the things that are important to you.
- Goals should be written down.
- Consider your financial goals for the following week, three months, the following year, and the following three years.
Analyze your income.
- Calculate the money you have available (the amount of your take-home, or net, pay).
- You shouldn't count overtime money as regular income, therefore leave it out.
Calculate your costs.
- Examine your credit card statements, store receipts, checkbook register, and other documents. Where exactly does your money go?
- Rent, car, and student loan payments are examples of "fixed expenses" that are simple to calculate.
- Food, clothing, and entertainment are examples of "flexible expenses" that change from month to month.
- Don't overlook costs that are billed quarterly, semi-annually, or yearly, such as taxes or insurance.
- To assist you in keeping track of these costs, look into personal finance software applications that have a budgeting tool.
Set up a budget.
- Consider your budget as a "spending plan," a technique to keep track of the amount of money you have, the expenses it must cover, and any leftover funds.
- Your spending plan should prioritize your "needs" before any "wants" that you can afford.
- Your expenses should be at or below the level of your gross income.
- Decide which expenses can be cut if your income is insufficient to pay your expenses. Next, alter your budget (and your spending!) accordingly.
First, pay for yourself!
- A crucial aspect of protecting your finances is saving.
- Every month, try to save as much as you can. If you continue, even a modest amount can have a significant impact. For additional information, see our savings calculator.
- Setting up an emergency savings account with enough money in it to pay for three to six months of living expenses is a terrific objective.
- Your savings can help you reach your goals after you have an emergency fund.
Use credit cards with caution.
Check back frequently.
- Make sure to frequently examine your budget.
- Does the strategy still assist you in achieving your objectives and meet your needs? If not, make some changes or come up with a brand-new budget that better suits your requirements.
Now if these steps worked for me, I know that it can work out for you! Just take things slowly and do not rush into doing everything at once. It can be overwhelming at first, but I know that you can do it. Start off with a weekly budget then move on to a monthly and so on. Even though you need to know how to budget start off not asking how to budget money but ask why you want to budget.