How To Create A Budget And Stick To It: A Simple Guide For Beginners.
Creating a budget is the first step toward creating financial order in your life.
It is essential that you have one to ensure that your money goes where it should.
A budget, while not an exciting process, can be fun if you are making progress toward your goals.
Writing a budget is easy and it will also save you money.
If you are someone who doesn’t know where their money goes, then this article is for you!
It’s important to plan ahead so that your bank account ends the month with more than it started with.
When you create a budget, you must consider how much money is coming in and how much is going out.
You may want to separate your earnings into different accounts (like “income,” “bills,” and “savings”) and then track where your money goes each month.
This is the best way to find out where you can make changes that will positively impact your financial life.
SETTING UP A BUDGET CAN BE BROKEN DOWN INTO THREE SIMPLE STEPS:
1) Figure out what kind of expenses need to be included in the budget…
2) Figure out when those bills are due…
3) Record when payments are made so you know what has been paid and when…
4) Review it all at the end of the month and update where necessary.
Step One: Include Expenses In Your Budget
When you create a budget, it helps to remember that all your expenses should be included in the budget: even ones that “don’t fit” like entertainment, gifts, and vacations.
These items eat up money without providing any benefit.
They can easily get out of hand if they aren’t reigned in.
Record every expense (no matter how small) so you know what you are spending on each item.
You may find areas where you can reduce your spending if certain items don’t provide enough benefits to justify the cost.
Step Two: Determine Due Dates For Bills And Payments
Create a list of all of your bills and due dates.
This will be your master list.
Add any recurring payments (like Netflix and gym memberships) to this list as well.
Always pay these items on time – otherwise, you run the risk of late fees and other consequences that require more money to fix.
If you sign up for automatic payment reminders from your bank or bill-pay software like Mint, take a look at them each month and make sure they match up with what is on your budget spreadsheet.
Step Three: Record Transactions And Payments
At the end of each month, record all transactions from bank statements so they match the list of expenses in your budget.
Double-check information from online banking sites as well as paper receipts.
When making a payment for something, always note the date, amount, and payee name.
You can even scan or take a picture of paper receipts to store in your digital file cabinet.
A good rule of thumb is to record anything that has caused an increase or decrease in account balances.
Step Four: Check And Update As Necessary At The End Of Each Month
You should check and update your budget at the end of each month so you always have up-to-date information.
This includes checking whether any payments were missed and which bills are due next month.
Doing this will help you plan ahead for what expenses need to be covered, as well as how much money should be set aside for savings and other long-term financial goals.
What is a budget?
A budget is a way to maintain order over your money.
It also helps anyone who has control of the flow of that money know exactly where all expenses are coming from and going to.
A budget must have clear records of both income and expenditure if it is to be accurate.
That’s why records are so important in creating a budget because without them you cannot find out what changes need to be made for improvement in any aspect of life.
When you make a budget you are setting out how much money you will spend each month on your necessary items (such as food, drink, etc.),
how much allowance should be spent on entertainment (like going out with friends), how much allowance should be spent on luxury items (like buying coffee every day), and how much allowance should be put into savings and long-term financial goals.
Why do you need a budget?
A budget helps you to see your finances clearly.
By knowing exactly where your money is going, you can make changes in spending habits for the better.
A budget records how much money is coming into our life (such as salary or benefits) and how much is leaving (expenses).
It tracks what is coming in and what you are spending by recording all expenses throughout the month.
Once your budget has been made up, it will help you decide whether there is enough income coming in to cover all of your necessary monthly expenses along with any long-term financial goals that have gone out of reach due to overspending on an entertainment item or luxury item.
The basics of creating a budget;
There are many ways to create a budget and you should choose the method that works best for your personality and lifestyle. Some of the most popular methods include:
Step One: Create A List Of Expenses
Start by making a list of all necessary monthly expenses so they can be compared with what is coming in (income).
As mentioned earlier, such expenses would be classified as either necessary (such as food, drink etc.) or discretionary spending (entertainment like going out with friends).
Keep in mind that while some areas of life may not require additional money immediately, such as savings goals or long-term financial goals, you must plan ahead for them when creating a budget.
After compiling your list, add columns next to each expense and label them “Income To Be Received” and “Amount Spent This Month”.
Step Two: Set Up A Second List Of Income Sources
Next, make a list of all income sources (such as your salary or benefits) you receive each month.
For each income source add a column on the side labeled “Monthly Amount” and record how much money you will be receiving from those sources for the month.
Include every possible source of income that is guaranteed to come into your life such as salary and allowances.
Keep in mind that some income may not be available until later in the month or even at the end of the month, so leave room for adjusting figures later on.
When creating a budget it’s important to keep track of every cent that enters your life.
Step Three: Compare Income And Expenses
After completing both lists it’s time to compare the two and see if there is enough income coming into your life to cover all necessary expenses plus long-term financial goals or savings goals you have set out for yourself.
If so, great! You can skip ahead to reviewing your budget at the end of each month.
If not, where does the discrepancy lie? Is it in your income sources? Are more sources needed? Or are expenses too high?
Make any necessary adjustments to your existing expenses or income sources before moving on.