Does money troubles have you down in the dumps? Are you having a hard time stretching your money from paycheque to paycheque? If so, it sounds like you may not have a solid budget in place. Creating a budget and sticking to it doesn’t have to be hard at all, but it does take a little effort to get started and maintain it. The greatest benefits to budgeting are having financial peace of mind, eliminating debt and achieving your financial freedom.
I have some tips to help you create a simple budget for beginners or anyone who just wants to budget with ease. Those of us who budget religiously had to start somewhere, so let’s jump right in!
- Gather all your financial data including the amount of incoming money that you receive, plus all of your bills and expenses. This information is crucial for creating an accurate, workable budget. Here’s information that you’ll need:
- Income including salary or hourly wages, tips, and any additional funds coming into the household
- Fixed expenses like utility bills, rent/mortgage, insurance, debt repayment, etc.
- Variable expenses like groceries, fuel, car maintenance, etc.
- Annual expenses like furnace/chimney cleaning, property taxes, etc.
- Miscellaneous expenses like coffee shop visits, entertainment, dining out, convenience store purchases, etc.
- Keep track of your spending habits to determine where your money is going on a every day basis. This can help you figure out your money leaks and where you can make cutbacks. If you’re spending your money roughly the same way from paycheque to paycheque, then track your spending over one pay period by getting receipts for everything you spend your money on….and I mean everything (even if it costs less than a dollar)! If you buy something from a vending machine, make your own little receipt with the amount spent and include it with your other receipts.
- Setting your financial goal(s) is an important part of creating any type of budget. It helps you to see what you are working towards such as a vacation, a downpayment for your first home, paying down existing debt or buying a new car. Plus a budget can help you to prioritize your spending habits (necessities vs. luxuries) so you can reach your desired goal(s).
- Now do the math and subtract your expenses from your income. Where are you at? Do you have a positive balance, negative balance or do you break even? If you’re in the positive, that’s great for you. That means you are making more money than you spend. Yesss! If you have a negative balance, then you need to make changes right now! You are spending more money than you are making and that means it’s time for a financial overhaul. Buckle tight, you can do this! If you break even with your budget that means you just have enough money to cover all your expenses but there’s no wiggle room or margin for unexpected expenses which may arise. Any one of these financial situations could benefit from making adjustments to your budget.
- Make adjustments to your budget and monitor the changes. This is where you implement the necessary changes to reach your desired financial goals. You might have to cut back on daily coffee shop visits or pay down more towards debt. Set aside time regularly to monitor your budget, see the progress you are making, or where you need to make additional changes. Budgets are meant to evolve with your financial portfolio.
Remember if you’re new at creating a budget, you should keep it simple! Use a tracking method that works best for your learning and working style; including a paper budget, a spreadsheet budget or a budget app. Your goal is to create a new healthy habit that is easy to use, so you can work towards enjoying your financial freedom later while staying on track!
Do you budget your expenses or just ‘wing-it’ when it comes to your money?
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