We keep track of so many things in life and our money should be one of them. Creating a budget is the best way to control our finances.
It helps us to live a life that we can afford and never spend more than we have.
Below are 5 easy steps that will help you create a budget.
Budget For A Goal
It does not matter if you have a long or a short-term goal, or both. You can save money for a holiday next year and also for retirement.
You will have to think about how much money you need to accomplish your goal and how much you can put aside each month. Then you will have to consider what to give up on, like having fewer nights out, our watching movies at home instead of going to the cinema.
The most important thing is to know how to prioritize when you will have to make difficult decisions.
Determine Your Income
Now that you know your goals, it is time to have a look at how much money you make every month. This includes your wage, your passive income, your side hustle income and so on.
If you are self-employed, paid on commission or if your income fluctuates drastically from one month to another you can still determine an estimate monthly earning by adding all your income the past few months and then divide it by the same number of months.
Track Your Spending
Well, is time to look at where all your money goes, and this may be the hardest part.
Start by listing all your fixed expenses like rent/mortgage, insurance, car payment, gas, electric, water and so on. If you pay them by direct debit, then you should check your card statement.
Then estimate all your variable expenses, like groceries, car maintenance, household maintenance, clothing.
Make Adjustments And Track Your Progress
In the beginning, you should check your budget constantly and see if everything goes as planned. You cannot develop better spending habits overnight, so it is totally fine to adjust your budget if you need to.
Maybe you spent more than planned on groceries last week or one of the bills came higher than expected. It is a good thing that you noticed them in time.
One important thing is not to give up on budgeting just because you overspent.
Budgets are hard but try to be realistic, do not put numbers only on paper and then spend double.
I failed at budgeting at the beginning, I wanted to save lots of money quick and created an unrealistic budget. I tried to stick to it and gave up a lot of things that made life more comfortable but, at the end of the month I still overspent.
I can’t even tell you how this made me fell. But the important thing is that I did not give up and neither should you.
Build a budget that is not restrictive, it is easy to stick to and it also helps you to save money for your goals.
Budgeting is a skill and it takes time to do it properly.
Share your budgeting tips in the comments below: