For most who are currently struggling with their everyday financial needs, budgeting is generally an unavoidable scenario. However, don’t panic. There are certain ways to make budgeting fun, effective, and painless, without it really affecting your everyday lifestyle by much. When it comes to budgeting, it is all about thinking critically about ways you can save money and conserving on existing services you may be enrolled in. Although budgeting is often frowned upon, it inevitably enables you to become a much wiser consumer. By following this step-by-step tutorial on how to create a budget, you will be able to create a budget, save money, and have a better understanding of your spending in less than 30 minutes.
Calculate your monthly income
When you think about budgeting, you probably get an image of math calculations and all that fun stuff. However, in order to know what you are able to afford or not afford, you need to be aware of your monthly income. Because without it, you simply cannot create a budget. The purpose of having a budget is to indicate simple things like if you are able to splurge or not, or currently able to enjoy that extra dinner night out. You can say basically, it is a guide, or a stepping stone for establishing a foundation in which you can live in without going into debt. The main objective of having a budget is to be more aware of your expenses and to not spend more than you can afford.
Create a list of your monthly expenses
This is where all the subtractions comes from in the calculations. In addition to creating an average of your monthly income, it is just as important to make a list of total costs of your monthly expenses. These expenses may include, food, services, clothes, and other means which require deducting money off your paycheck. I recommend breaking your list of expenses into two categories, fixed and variable expenses. Items that go under fixed expenses are general expenses that don’t tend to fluctuate and is generally predictable. Examples are, Cable, Internet service, and so on. The other category called variable expenses should hold expenses that may fluctuate like for example, eating out, entertainment, vacation, and so on. Being aware of these expenses and categorizing them is extremely important when it comes to making adjustments geared towards your monthly earnings and creating a reasonable plan.
Making reasonable adjustments
Once you have categorized your expenses, now it is time to look back at your expenses and begin to really question if a certain expense is necessary. Like for example, paying for unlimited texting . Although it is more convenient, is it necessary? Budgeting is all about making minor sacrifices in order to sustain a certain way of life, without the need of additional income. The purpose of living by a budget is to ensure you do not go pass your limits and be more aware of your current financial situation. By making reasonable adjustments and thinking of ways you can substitute or possibly eliminate certain expenses, you are allowing yourself to be that much richer every month. The things I ask myself before I eliminate something is:
- Can I live without it?
- Is it necessary?
- Can I find an alternative and replace it?
- Do I still currently use this?
- Is it worth it?
- Am I happy? (ask yourself in a month)
Although the 6th question may seem odd, it is a question you should ask yourself after a month if you are still thinking about that one service you canceled. If you miss it after a month of cancellation, most likely, you didn’t accurately answer question 1. There are certain times when you should be able to enjoy the luxuries of life, however, there should always be a balance.
Have a realistic goal
One of the common mistakes people make is not have a realistic goal. Like for instance, saying you will cut costs of spending everyday by at least $30. Even though everyones’ standards of spending may be different, dropping say, $30, within a day can be rather difficult and can make budgeting seem relentless when it doesn’t have to be. It is recommended to slowly adapt to a budget you think is healthy, say, dropping $5 cumulatively every week, rather than making one huge decision for a variety of reasons. Adapting slowly enables you to transition to a more conservative lifestyle and at the same time, enables you to accept and get used to the new lifestyle. Budgeting should be adapted slowly because it can be uncharted territory and for most, not having the proper time to transition from one lifestyle to another, can lead to worlds of problems with added on stress. Budgeting is all about adopting healthy habits and becoming a much wiser you, and the sooner you adopt better habits, the sooner you will begin to see results. The biggest obstacle of budgeting is suppressing the urge to do regular old habits that may be costly, and substituting services like Cable, with other reasonable means.
Review your budget monthly
Last but not least, review your budget on a regular basis. If there is ever a notable change in your monthly income, it is extremely important to add that valuable information to your budget to ensure you stay on track. Budgeting is all about sitting down, reflecting, and creating a balance geared towards your financial situation. After the first month take a minute to sit down and compare the actual expenses versus what you had created in the budget. This will show you where you did well and where you may need to improve. From there on, take that information and learn from it and in no time, you should begin to start seeing results.Buy Now