Budgeting gets a bad rap. Many people think that it takes the fun out of spending. However, it accomplishes the exact opposite.
Through a budget, you can ensure that all your basics are covered, such as your savings, rent, utilities, and other necessities. These expenses are the most significant source of stress and conflict for many people. Once those are secure, you can treat yourself without the danger of coming up short for the month.
When you think about it this way, budgeting can give you immense freedom from financial worry. Better yet, you don’t have to be a money expert to budget wisely!
6 Ways to Start Budgeting Today
The essence of budgeting is having a detailed plan for your money so that every cent has a purpose. Make your money work harder with these budgeting tips:
1. Create a budget before the month begins.
The key to budgeting is to think ahead; way before your paycheck hits your bank account. Begin by listing your recurring expenses, such as rent and utility bills. Then, consider special spending needs for that month, such as a birthday or school supplies. Drawing up a budget at the beginning of each month will help keep you accountable. (See Related: Practical Money-Saving Tips That You Can Start Now)
2. Track every single expense.
Once the month is underway, start tracking all your expenses. No expense is too small— including that tube of toothpaste, the extra whipped cream on your coffee, or a pack of gum.
Tracking everything you spend that month will give you an accurate look at where your money goes. This process will reveal problem areas in the way you use your money, such as spending too much on fast food. Identifying these issues will help you make an even more effective budget next month.
3. Budget to zero.
Ready to take your budgeting to the next level? Give every dollar a job by budgeting to zero. This method means budgeting so that subtracting your expenses from your income equals zero. It doesn’t mean cleaning out your bank account. It means ensuring that your money goes where you want; whether that’s expenses, savings, investment, fun activities, and more.
4. Prioritize your expenses.
Savings come first, then food, shelter, utilities, and transportation. Don’t enter anything else in your budget until these are covered. Then, fill in the rest of your budget line items. Prioritizing your expenses will go a long way towards peace of mind during the month. (See Related: Why You Should Start Saving Money)
5. Pay off your debt.
If you have any debt, rank it high up in your budget categories. Keep in mind that as long as you have this obligation, the money you earn is not entirely yours— you owe it to debtors, as well as accumulated interest. Incorporate as much of your monthly budget as possible to your debt payments, given that you enter your priorities first. (See Related: Debt Reduction: The Absolute Best Ways to Get Out of Debt Forever)
6. Budget for fun.
Just because you’re on a budget doesn’t mean you have to deprive yourself. Reserve space in your budget for a treat now and then. Maybe it’s your favorite snack, a concert, or a night out. Setting aside some “fun money” is essential to staying happy, and in control of your expenses at the same time.
Following the six steps above will help you get started on your budgeting journey. You work hard for your money, so make it work hard for you by budgeting wisely!