Budgeting is never something that most people think of as fun. However, most people are surprised to find that once they actually start budgeting, they enjoy the sense of satisfaction that comes with it. It is still likely to never be described as fun, but for many, satisfaction is more important.
The Ultimate Guide To Budgeting
The first step to budgeting is looking at your past expenses. You will not be able to set a very good budget without knowing what you are currently doing. It is recommended that you look at about 6 months of past credits and debits to your account for this stage. This is also the stage where you will begin breaking down things into important categories. As you look at bank statements you will begin to see categories such as food, pleasure, etc.
It is also important in this stage to break your expenses down into two simple categories. Necessities and luxuries. Necessities are things you need to survive. For example, you need you need to pay your electric bill or you will not have light. That is a necessity.
A movie is an example of a luxury. You do not need to spend $20 at the theater to see a movie that just come out.
As you make this list, note that you will not have to get rid of all your luxuries. You just need to have a good idea of what your luxuries are.
The next step to budgeting is to lock in some goals. You will have a goal for your income and expenses. This must be a realistic goal based on your past income. You will also want to set a goal for how much you save each month. If things are tight, try for 5%. If things are going well, try for a little more. Someday you will be happy that you did.
Once you have a goal, then take all of your necessities and your savings amount and minus them from your income and see how much you have left over. Hopefully there is still a decent amount to be spent.
If you don’t have any money left in your budget at this point then there are a couple of routes to take. The easiest one is looking at your necessities and figuring out what could go down a little bit. Maybe you can turn your thermostat down a few degrees, maybe you have been buying name brand food and you can change to cheaper meal options. There are quite a few ways to cut. If nothing can be cut or downsized in your necessities list, then you will probably need to find a way to bring in more income. There are a lot of ways to make a small side income online, just figure out your talent, and see how to monetize on sites like Upwork or Fiverr.
Hopefully you have money leftover, however. The next step is to rate your luxuries in order of most to least important. This way you can just keep adding luxuries into your budget until your budget is full, and you don’t even have to think about what to cut because you already made a list in order of importance.
Once you have this done try to look at extenuating circumstances that may pop up. Do you have old appliances? You may consider a home warranty. Do you have a car that is on the verge of breaking down? You may consider a car fund. There are quite a few ways to make sure that emergencies don’t send your budget into a spiral, just figure out what works best for you and stick to it!