Have a Budgeting Plan
Our website help users secure the bag. One way to keep the bag secure is by budgeting so you can keep your wallet and purse stuffed with your cash. Our budget calculator help users see what they are spending each month on major and minor reoccurring expenses like rent, other bills, groceries and other miscellaneous items. Its one thing to estimate the amount of money you spend over the course of a month, it's another to actually see it. Users can scroll between 1 month and 5 years with the budget calculator above. Below we discuss the basics of budgeting, however you may also want to check out Budgeting Like a Boss!
The Basics Of Budgeting
Setting a budget is a little bit like learning the alphabet when you’re little. It’s not the most fun thing to learn but it’s also 100% necessary in your life as an adult. Now that you’re older, we bet that you’re happy that you learned the alphabet as a kid. Luckily, just like how the alphabet has rules about how each letter sounds and how they work together, budgeting also has rules. The four fundamental rules of budgeting go like this:
- Set financial goals.
- Track your income and expenses.
- Spend less than you earn.
- Stay disciplined.
Once you have a firm grasp on what you’re trying to accomplish and what you need to do, budgeting becomes the easiest thing in the world! Let’s take a look at some of the basics of budgeting.
Set Financial Goals
Just like most things (going to the gym, taking a class, learning a new instrument, etc.) it’s important to set goals. Setting a goal is how you track your progress and make improvements. Your finances should be the same way. Here are a few examples of common goals.
- Have enough saved to comfortably retire at your desired age.
- Determine how much of a down payment you’ll need for your dream house and save for that amount.
- Save for shorter-term goals like a trip or a new car.
Once you have a good idea of what you’re saving for it will make it that much easier to set and stick to your budget. However, just like going to the gym, if you set a budget without any end goal or destination in mind then your motivation to stick to it will quickly fade away.
Know Your Income
After determining your financial goal, the next step in the budgeting process is to determine what your income is. If you work a consistent job then this is as easy as keeping track of when your paycheck comes and how much you receive. Most jobs will pay you bi-weekly or twice a month. This means that you can take whatever your normal check amount is and double it to get your monthly income.
Understanding your monthly income is going to be important because that will be your upper limit of how you can spend each month. If you’re spending more than your monthly income then it is physically impossible to save enough to meet your goal.
Understand Your Expenses
This section is one of the most important. If you don’t have a firm understanding of how much you’re able to spend each month then it’s easy to let your spending get away from you. We recommend tracking your spending weekly since most people spend about the same amount each week.
You can track your spending in categories like:
- Weekend activities
- Reoccurring expenses (monthly bills)
The idea isn’t to slash your expenses so much that you’re living on wheat thins and walking 10 miles a day to avoid paying gas. The idea is to have a reasonable expectation of what you can afford to spend each month.
Set a Weekly and Monthly Budget
Now that you know what your average monthly income and expenses are you can start to set your weekly and monthly budget. By this point, you should have an idea of how much you’re spending versus earning each month. This is where goal setting will come back into play.
- Scroll through your bank statements and tally up your total expenses for the month (most bank apps will do this for you). Notice what your biggest expense categories are (eating out, fun money, subscriptions, etc.). Make sure that this number is less than the total amount you earn for the month.
- Next, determine how much you want to save each month. A good starting point is $100 a month but if depending on the size of your savings goal you might want to go higher.
- Then determine which expenses you can cut down to free up an extra $100 in your budget to save. Focus on cutting down the categories with the biggest spending first. Once you’ve done this you should have a good idea of how much you’re able to spend weekly to meet your savings goal.
A budget is only as good as the person who follows it. For example, you can spend hours making the most detailed diet and fitness plan to get into stellar shape. However, if you end up skipping the gym 3 out of 5 times during the week then it doesn’t matter how good of a plan you wrote. Similarly, you can spend hours setting a detailed budget but if you don’t follow it then you’ll just be wasting your own time. One of the most effective ways to make sure you’re sticking to your budget is to avoid impulse purchases.
We hope that you’ve found this post valuable when it comes to understanding the basics of budgeting! If you’re interested in learning more, please subscribe below to get alerted of new articles as we write them!
Trying to save up for something special? Looking to cut the cost of your monthly expenses? You can do this by budgeting your money. Using a budget is a great way to save money and control your monthly spending. With a little effort and willpower, you can help improve your financial situation by budgeting money.