How To (Finally) Start a Monthly Budget
If you don’t already have a monthly budget in place, it’s likely because the idea itself is so stressful.
Finances can be overwhelming under the best of circumstances, and downright terrifying if you don’t get a handle on them.
But even if you don’t make a lot of money every month, budgets are extremely useful for everyone.
We’ll take you through how to start, maintain, and adjust your budget so you can stop feeling anxious about the state of your affairs and start moving confidently in the direction of your financial goals.
One of the best ways to get started is to simply write down what you spend, as opposed to crunching any numbers.
You don’t have to alter what you do, just document it (either electronically or on paper.)
This is often a good way to start seeing those hidden spending habits you’re likely missing.
Budgets aren’t always as easy as cutting out your daily cup of coffee, although sometimes that can help.
Effective budgeting is about identifying what you can live without and finding ways to save money on what you can’t.
From there, you’ll want to calculate exactly how much money you make a month.
This includes all sources of income and should account for any loss of income that may still be forthcoming (e.g., impending tax season, etc.)
Next, highlight all of the expenses that you have every month from your original list.
Once you have the two final numbers in hand (income vs. set monthly expenses), you’ll be able to get to work.
Maintaining Your Budget
Once you know where your money goes, start setting realistic limits for yourself.
Ideally, you should be saving 20% of each paycheck, spending 50% of necessary expenses, and the rest of what you want — but that’s not possible for many people.
Whatever the discrepancy is between your income and necessary expenses, there are ways to work within even the tightest of margins.
Maybe begin by cutting down on your entertainment budget by 10%.
If you feel like your necessary expenses are eating up your income, try researching competitor’s prices for monthly bills like internet or car insurance to see if there’s a better deal.
The idea is to eventually cut out everything you don’t need and to pay the minimum for everything you do need.
However, it’s important to remember not to go overboard with enthusiasm here.
Part of maintaining your budget is deciding when you’re the happiest parting with your money.
The more you deny yourself the things you love, the more likely you are to splurge everything you’ve saved.
Long-Term Spending and Saving
Once you’ve got a handle on the basics of your budget, you can start really planning for the future.
The earlier you start considering retirement, the better.
Perhaps take 5% of your savings each month and devote it exclusively to retirement.
Compound interest over several decades (or even just a few years) can yield more than you think.
As you start to pare down your monthly expenses, you can start to ramp up your yearly savings.
Committing to your budget means putting in the effort!
It’s going to take time and a lot of mistakes before you really get anywhere.
The good news is that you might be surprised at how much you can save without feeling like you’ve given up your lifestyle.
The information provided here is for informational purposes only.
It is not legal or financial advice.
Consult with an attorney or other professional to determine what is best for you.