When it comes to setting money aside and paying bills on time each month, do you often fall short? You’re not alone. With an unsettling economy, it’s hard to manage funds, when paychecks are unpredictable and expenses keep piling up. That is why being armed with some key budgeting tips and facts can transform your financial lifestyle. Here are some ways you can turn things around starting now.
Step1. Write Down Your Household Income
Seems easy enough. But really be sure to include everything. This includes you and your partner’s net or take home income, bonuses and any income from freelancing. Don’t forget about bonuses and child support income as well. This basic number will help you with creating a solid plan moving forward.
Step 2. List all Expenses
This can be a hard pill to swallow. No time for secrets here. Many people leave important information off of this portion of their budget plan. But it’s essential when it comes to having a successful livelihood.
Jot down all that you spend, including frivolous expenses related to shopping sprees or morning java. But be sure to list fixed expenses such as rent, car loan, retirement contributions, utilities, groceries, credit card payments and personal loans.
Step 3. List Disposable Income
This is easy. Add up bring home income and living expenses. Subtract from the two. This amount is your disposable income. Your disposable income should be roughly 50 percent or less of your gross pay for living expenses. Use this amount to pay toward wants, debt repayment and future savings combined.
Step 4. Pick a Budget Method
Try something like the 50/30/20 rule as a basic framework to get started. It’s a simple budgeting concept.
- 50% of your income is for basic needs.
- 30% is for wants.
- 20% set aside for debt repayment and savings.
List each amount, so you have goal numbers to work with each month. Don’t forget to always budget above your previous month. This includes groceries, lunches, utilities, house repairs and emergencies. This will prevent running out of money should something urgent arise. In the want category, don’t forget an additional emergency or urgent fund for things out of your control. Because let’s face it, life happens!
Step 5. Budgeting, Saving and Dispersing
So you have a basic understanding of how to budget like a pro. But what about the bread and butter behind it? How do you physically do it? This is vital to make this whole concept work, and it depends on you and what works based on convenience and lifestyle. One example is the envelope system. Where you cash out your paycheck each week and simply use envelopes to set money aside and then deposit it into the bank.
You can also track everything on a spreadsheet using a zero-based budget method. Having this connected to your bank and savings account is a must. Explore the two and decide which one works best for you.
Step 6. Budget Ahead
Find a time to budget that works for you. It’s typically best to do it a month in advance. This way you can easily go to your spreadsheet or phone app and see where your money needs to go.
This is also a good time to readjust for the month ahead. Inflation, new bills or an emergency expense can all affect your budget moving forward.
Budgeting doesn’t have to be complicated, and there are endless ways to do it. Don’t get frustrated with the process. Take it one step at a time. Getting the basics down pat is the best way to get in the routine of budgeting like a pro.
Here’s to Saving and Thriving Daily!
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