Never Had a Budget? Here's How to Create One
February 17, 2022
If establishing a budget seems overwhelming, once you begin with a few simple budgeting principles, you’ll quickly see a difference in your financial management. Here’s how to get started.
Set goals
Having a budget can help you get a handle on your finances, and achieve your goals. Goals can include determining how much debt you have and create a plan to pay it off; the amount you want to put toward retirement savings; and saving for future purchases, such as a car or home.
To can’t establish a budget without knowing your numbers.
Track your income and expenses
To create your budget, determine your income, including your job and any additional money you earn, like with a side job. Then list all your expenses, such as rent or mortgage, food, utilities, gas, and insurance.
Review where you spend
Once you have your income and expenses set, you can track your spending for a month. Then determine where you’re spending your funds, and places where you may need to increase or reduce budget lines. For example, you may spend less on gas if you are working from home.
Understanding the difference between needs and wants can help you determine your budget and goals. A need is shelter, food, and utility costs, while wants are buying a new sweater, or the latest cellphone.
Add saving to your budget
The easiest way to save is to set goals to save for, such as an upcoming trip, or a car. You can also save for yearly expenses, like holidays, taxes, and planned medical procedures.
Having an emergency fund is also a good idea. This can be used to cover unplanned costs, such as car repairs.
An easy way to make saving a habit is to establish automatic transfers to your savings account twice a month, or each time you get paid.
Reduce your budget costs
If you need to save money, review your subscription services, and how much eating out. These are two areas you may be able to reduce costs on and use those funds toward other goals. These could be paying off debt, or adding to your emergency fund.
Review your budget
At least annually, you should review your budget and updated based on changes, such as a new job, new baby, or new goals. Maybe this is the year you want to buy a house, so you want to start saving for a down payment.
Tags: Budgeting, Tips and Tricks