Tips For First-time Budgeting
Even if you’re not using a budget spreadsheet, you may need some way of determining where your money is going each month. Creating a budget with templates can help you feel more in control of your finances and allow you to save money on your goals. The trick is to find ways to keep track of your finances that work for you. These tips can help you create a budget.
1. Base your budget off of your income.
Along with the overall structure of your budget, you should also think about the type of budget that is best for you. The experts recommends basing your budget on your earnings. So if you get paid weekly, create a weekly budget or a monthly budget if you get paid monthly.
Feel free to try different formats and ways to manage your budget until you find the one that best suits your lifestyle and money goals.
Also note how often you spend money. If you’re pulling out your credit card every day, you may want to set a weekly budget. A weekly budget can help you keep an eye on your day-to-day expenses.
Experts recommends opening a separate checking account specifically to track your spending and keep it under control. Set aside some money on a debit card weekly or monthly based on your budget, and see how much you spend — or, ideally, save.
2. Differentiate between short-term savings goals and long-term saving goals
Once you’ve asked yourself why you want to start saving, the next step in setting up a budget is to break down your savings goals into short-term and long-term plans.
What is the purpose of short term savings? These relatively simple goals could include the following:
- Great furniture
- Weekend getaway
- Down payment for the car
- Emergency Fund
Long-term savings goals might look like:
- A deposit for a house
- Paying off any long-standing debt
- Starting up business
- A journey around the world
- Saving for retirement
Having a combination of short-term and long-term savings goals can make the bigger goals seem less daunting. As you gradually achieve your short-term goals, you may realize how much it is possible to save money and take control of your finances. And this can make your long-term goals feel even more attainable.
3. Separate fixed expenses from variable expenses
Once you’ve got a good idea of where all your money is coming and going each month, the next step is to separate your expenses into fixed and variable costs.
The category of fixed costs may include:
- Monthly rent
- Heating and electricity bills
- Insurance costs such: car, personal liability or property.
- Student loan repayments
Variable costs, which may change monthly or even weekly, include:
- Grocery shopping
- Entertainment such as: nights out, cinema trips, concerts
- Clothes puchasing
- Dining out
4. Keep it simple.
When you’re creating your budget for the first time, try to keep it as simple as possible. This way, it’s not overwhelming and it will be easier for you to maintain.
A lot of people think that you have to have these complicated budgets, these complicated spreadsheets — and you grow to that. experts suggest simply writing down your costs; things you have bought in the last month, any annual or quarterly charges, and subtracting your revenue from your costs. This will give you a great map of how much you’re saving versus spending, and allow you to know areas where you can possibly cut back.
A simple structure like the 50–30–20 budget can assist you track the spending without having to spend a lot of time keeping a bunch of categories.
Split your expenses into three categories — 50 percent for needs, 30 for wants, and 20 for savings or paying down debt. You can always change the percentages based on your lifestyle. Your budget has to work for you. You can also download a budget app for an even easier way to keep track of your budget and spending.