Do your finances seem to continually be out of your control? Are you spending too much money on credit cards? Do you struggle in keeping a balance between your spending and savings? If any one or more of these circumstances describe your financial situation, maintaining a budget in place may support you. In fact, creating a solid budget and sticking to it are the very first steps leading to your financial freedom.
Although budgets tend to be great in action, they are hard in theory. Not sure how or where to start budgeting? Whether you have not managed to create a budget plan or are simply facing trouble sticking to your budget, here is your easy, yet effective, step-by-step guide to help you build a budget you can effortlessly follow.
1. Begin with Big Goals
The first thing you must know is that successful budgeting is not centered around what you are sacrificing; rather it focuses on your goals. Thus, make it clear in your mind: WHY you are making a budget. Do you want to get rid of your debts as soon as possible? Are you planning to pay cash to get a vehicle? Do you aim to purchase a home? Do you wish to retire early to travel around the globe? In essence, focus on your big goals as it is the very secret to getting everything you want to achieve.
2. Track your Spending
Before creating a budget plan, you must understand how much you spend every month on various items. And, to determine this you have to identify your budget baseline simply by tracking your spending for the past few months. Thus, go through your recent bank statements, last six months or more, and figure out how much goes towards utilities, food and groceries, mortgage or rent, transportation, shopping, etc. This process will also enable you to identify areas where you often overspend. Consequently, you become more aware of your spending and saving patterns, helping you make better financial decisions.
3. Make the Most of Technology
Technology has made things far easier than most people really know. If you have never made a budget before, are not sure where to begin your budgeting, or simply get frustrated with complex details, using a smartphone app is a good idea. In fact, there are many great budgeting, bookkeeping and finance apps that can connect with your bank accounts and set up a complete budget over a time by using the data from your spending habits.
4. Give Each of your Dollars a Purpose
When you begin budgeting your each and ever dollar, you are eventually planning for unexpected situations such as spending on a sporadic cup of coffee with your friend. This will also help you put your extra money towards either savings or an emergency fund. Give your money purpose, down to your every last penny.
5. Set Goals
Your financial goals can wipe the pain out of saving money. The more specific goals you have, the more motivated and excited you are to save money and the more you are inclined to stick to your goals and, thus, budgeting. Your great goals could be saving for a dream vacation with your family or a down payment on a new home.
6. Allow Yourself Some Fun
Besides focusing on your basic needs and financial goals, make a thin line for a little fun as well. If your budgeting plan makes your life boring, you are less likely to go along with it. On the contrary, you will love sticking with a plan that keeps you happy. A few fun categories in your budgeting may include eating out on weekends and saving for winter holidays.
7. Use Cash
It is often easier to overspend, thus, save less when you are using credit or debit cards. Therefore, take out adequate cash on your payday for the budget categories that make sense and tell yourself ‘I cannot get more money, even when I run out.’ Hence, you are done with spending right away when your cash is gone! And, this is simply one of the easiest ways to keep yourself accountable.
8. Automate your Savings
Try transferring part of your paycheck into your savings account as soon as you receive it. This way, you will help minimize your spending and improve your savings. Also, leverage auto withdrawals in order to save for expensive transactions like a vacation or new furniture.
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