It’s fun to spend money, but it can also be very easy. While this can be a great feeling, once your paycheck is running low and there are still a few days in the week, you might begin to question your spending and budgeting habits.
Although budgeting may not be everyone’s first instinct it can be done easily in your own personal life. These are the fundamental pillars we believe budgeting should be. We have just a few steps that will help you get the most from your income each month.
Keep track of your spending
You’re likely to have experienced a similar long-term diet if you’ve ever tried it. You won’t be able to keep track of every snack you eat throughout the day. Instead, you will need to track every penny you spend. It’s not exaggerated! Every. Last. Penny.
You can start saving money immediately by taking this step. We often make small purchases throughout the day, which are often related to snacking. These purchases can add up over time, week after week, if we don’t think about them.
This will help you to be more aware of your spending habits and identify where you can trim back. This will help you to think twice about making a purchase that is unnecessary, which can help you save money. Keep track of your spending in a notebook or a Excelspreadsheet. These numbers will come in handy later.
Write out your expenses
You will need to keep track of your spending and specifically what you need to spend–things such as rent, utilities, and so on. Although you can write them all down, it’s likely that you will miss one or two items that could cause problems. It is a good idea to go through your expenses for a month and note every payment you make. You should always check your bank account daily, in case there are automatic payments that you don’t have to think about.
Here are some examples of things to watch out for:
– Rent/mortgage payment
– Insurance payments
– Internet/phone bill
– Car payments
It’s important to combine your fixed expenses with the spending that you have tracked in the previous section. This will give you a clear idea of how much you are spending, how much money you should be spending, as well as how much you can reduce.
Allocate and Save
Now that you have completed your month of data collection, it is time to put it to use. You can now compare your income and the amounts you have written down. Set aside the right amounts for your expenses as well as for savings. If you have the budget, 10% is a good amount to save.
You must make a conscious effort to save money. Don’t let 10% of your salary go unattended. It doesn’t matter if you keep it in a separate account or withdraw it. You can also invest it. It should not be something that you are able to grab easily if you aren’t saving.
You should also consider entertainment costs. Budgeting is all about reducing your income for non-essential activities and purchases. However, you don’t have the right to live a boring lifestyle. Take a look at how much you spend on entertainment, movies, or other fun activities, and set aside some for savings.
You should now be two months into your research. One month for actual budgeting. What did you think? Did you forget about some essential expenses? Did you realize that you had more savings than you anticipated?
It’s possible that the numbers won’t match exactly after your first attempt. That’s okay! You can check and adjust your numbers to reflect what might have caused the differences. You might need to adjust the amount you put into savings or recreation if you have more expenses than you expected. You might want to save more money if you end up with more cash than you expected.
It’s about understanding your budgeting habits and where your monthly budget is headed. This is also a time to evaluate whether a monthly plan works for you. The monthly approach is easy to set up and maintain. However, if you have a longer time frame to plan, you could follow the same process bi-weekly. You should be aware of expenses that fall on the one or the other half of the month, but the concept is the same.
Rinse and Repeat
Once you have completed the first round, it is time to move on to the next! You should always consider your review step when planning for the next month. It is also important to remember that expenses will fluctuate between months.
You might get some bills bi-monthly or you may have different spending patterns throughout the year. For example, your power bill may rise in the colder months. Spending will increase if you take a vacation every month. You won’t have the same month every month, but it is possible to track your spending and improve your budgeting skills.