Setting a budget is a great way to ensure you’re making the most of your income without overspending. No matter how much you earn, a well-planned budget can help ensure you have enough money for everything, and even have extra to set aside at the end of each month. If you’re constantly stressing about running low on cash, following these tips for setting a budget can help you keep your finances under control.
1. Get it Down on Paper
You might believe it’s easy to budget in your head, but there’s no comparison to having everything down in black and white. Whether you use a spreadsheet on your laptop or simple pen and paper, it’s important to stay consistent and write everything down. If you don’t, it’s too easy to overlook small expenses.
2. Do a Spending Audit
For one week, keep track of your finances by writing down everything you make or spend. Make sure to include even small expenses like coffee. By keeping a log of where all of your money is going, you’ll have a much better idea of what can do to meet your budget. You might estimate in your head that you’re only spending $20 a month on coffee, for example, only to realize you’re actually spending $80.
3. Pay Yourself First
One of the first items on your budget should always be some amount that you put towards your personal savings or investments. While this may not seem as important as other items, like rent or car payments, your savings are a crucial part of your financial health. Decide how much you want to save or put aside for yourself first, then rearrange the rest of your budget to ensure you can meet that goal. This may mean having less walking-around money, or cutting back on other unnecessary expenses.
4. Make Every Dollar Count
Make sure every dollar you earn has a specific goal. Your budget should have categories for every part of your life. It should include things you need to pay for, such as rent, groceries, and utilities, as well as things you would like to be able to pay for, such as hobbies or spending time with friends. You should avoid having an “other” or “miscellaneous” section.
5. Review Your Budget Regularly
The budget that works for you this month won’t be the budget that works for you one year or even a few months from now. Review your budget often and evaluate how effective it is. Do you need to put more money into savings? Do you need to spend less on things like entertainment and restaurants?
6. Put Aside Money in an Emergency Fund Each Month
One of the smartest things to include in your budget is a savings pool for emergencies. Every month, you should set aside some money to use for things like car repairs, a medical emergency, or some other unexpected expense. Make sure you have the cash on hand to deal with these issues when they happen, without needing to dip too much into your savings.
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Regardless of your current income, planning out your spending is a great first step towards becoming more financially responsible and secure. Good luck budgeting!