Develop a Budget that Works: Better Money Budgeting
It’s no secret that, as young adults, it’s likely you’re still trying to figure out your own financial situation. Chances are, you may not even be in the most stable of positions to start budgeting money from day one. However, that doesn’t mean you can’t develop a budget that works for you. There are steps you can take to get your finances under control and help yourself start living on more of a financial plan than just on a whim. Here are some tips to better help you develop your own budget that will actually work.
Work out your income
When it comes to developing an effective budget, one of your first steps should be figuring out how much money you make on average per month. . There are different ways to work out your income but start with identifying all your sources from where you regularly get money. There are different ways to work out your income but working backwards from your monthly expenses and saving goals can be a good way of keeping yourself accountable.
Work out your bills
Once you know how much money you have coming in each month, look at how much goes towards your rent/mortgage, utilities, food and other necessities. The biggest mistake people make when creating their budgets is failing to factor in irregular expenses like holidays or gifts; these don’t come around every day (or even every year), so don’t forget about them when building your budget plan.Now that you are aware of your monthly expenses, what about when it comes to discretionary spending? It might come as a surprise, but once you begin breaking down every single transaction from your checking and savings accounts, you’ll be able to gain control of your debts and use more of your paycheck towards savings goals. Here are some common fixed expenses to consider: rent/mortgage, utilities (phone bill, cable bill), insurance (car insurance, health insurance), transportation costs (gasoline), food and dining out (groceries). Here are some typical discretionary costs: entertainment (movies, concerts), clothing purchases, shopping online or in-store.
Work out your 'numbers'
When it comes to budgeting, it’s critical you know where your money is going at every level (daily, weekly and monthly). The easiest way to do so? Work out your numbers—that is, identify your sources of income and what expenses are coming from which sources. Then take an inventory of all expenses incurred. That will give you an idea of where your money is going each month. From there, try to find ways to trim down on some non-essential costs. For example, if you have a streaming service but rarely watch tv or use that particular service, consider canceling or switching providers or plans. If you have several credit cards with balances on them, call up your credit card company and ask if they can lower your interest rate. It never hurts to ask! You may be surprised by how accommodating they are.
Work out what you can afford
One of the first steps in developing your budget is working out what you can afford. While it’s tempting to just spend as much money as you make, it is important to remember that there are bills and other costs associated with living. To create a balanced budget, factor these expenses into your financial plan before spending money on non-essential items. This can help you stay in control of your finances and better manage your personal debt.
Work out where your money is going wrong
If you’re not saving money, chances are it’s because you don’t have control over how much is coming in and how much is going out. Start by tracking your spending (or have someone or an app do it for you) so you can work out what has caused your current levels of debt. For example, if you find that most of your money is spent on eating out, then focus on reducing these expenses in future. It might take some time to get things under control, but once you do – watch those savings add up!