Making a personal budget can help you make better financial decisions and achieve your goals, but it can be difficult to know where to begin. Here are some expert budgeting suggestions for beginners.
It’s tempting to reward yourself every day without considering your bank account balance.
But, let’s face it, you don’t want to be living paycheck to paycheck, in debt, with nothing set up for unexpected expenses. Unless you have a money fountain in your backyard (or a sizable trust fund), you’ll need a strategy for spending your hard-earned money.
Making a budget — and sticking to it — could help you achieve the financial independence you desire. It doesn’t have to be a difficult procedure.
4 Simple Steps to Budgeting
In four easy steps, we’ve outlined exactly what you’ll need to do to construct your own model budget.
- Prioritize your expenses.
The majority of experts begin by distinguishing between discretionary and fixed expenses. Start with keeping note of everything you spend money on, then prioritize your monthly, recurrent, and one-time spending.
Place “need” expenses first — those you can’t live without, including shelter, food, transportation, and child care.
Then prioritize savings for emergencies and retirement, followed by “wants,” or non-essential items such as eating out, vacations, or Netflix subscriptions.
- Create a budget based on your earnings.
You must consider the type of budget that will work best for you in addition to the general layout of your budget. Replay suggests basing your budget on your earnings. Create a weekly budget if you are paid weekly, or a monthly budget if you are paid monthly.
Feel free to experiment with different budgeting styles and methods until you find one that best suits your lifestyle and financial goals.
According to McCreary, you should open a separate bank account to keep track of your spending and keep it under control. Put money on a debit card based on your budget weekly or monthly, and observe how much you spend—or, ideally, save.
- Remove a few “wishes”
Start reducing a few expenses that you only want and don’t need — at least temporarily — once you’ve reduced the list.
Taking public transportation instead of an Uber or other ride-sharing service, or cooking at home instead of eating out, are examples of this.
Check-in on your spending every few weeks (or whenever you feel like it) to see how you’re doing and if you need to make any budget adjustments. Set realistic spending goals for yourself; being too strict can lead to impulse purchases.
- Try a cash-only diet.
Call it a cash diet because it’s January, and commit to five simple lifestyle adjustments that can save you thousands of dollars over the year.
Switch to a debit card for the month if you have trouble sticking to a budget.
Place your credit cards in a drawer and commit to only spending cash for the next few weeks.
You shouldn’t buy it if you have to put it on a credit card and won’t be able to pay it off in full next month.
Conclusion
Budgeting will help you recognize your spending habits, both good and bad, so you can eliminate any unnecessary expenses and obtain a clear view of your cash flow. Knowing your finances in this way can also help you prepare for any unexpected costs or financial setbacks.
Don’t be scared to experiment with different budgets until you find one that works for you (or a combination of methods). Your budget doesn’t have to be flawless; it simply has to be appropriate for you.