It doesn’t matter if you earn a little or a lot. Understanding and putting basic budgeting techniques into practice can take you from where you are today, to where you want your finances to go in the future. So, gather around—it’s time for Budgeting 101.
If you’re someone who spends or makes money—you need a budget. It’s a simple fact. We all need to understand how much money is coming in, and how much is going out. It sounds tedious, but before you dismiss it, take a look at these perks:
If these benefits sound good to you, it’s time to create a plan—one that is simple and actionable. Here are our most basic budget tips so you can start enjoying the perks of budget-friendly living and practice financial self care.
Creating and following a basic budget is one of the most beneficial things you can do for your current and future self. And like any other lifestyle change, it will take time to get used to living on a budget.
To improve your odds of success, ease into it by following these budgeting 101 tips:
A basic budget doesn’t have to be super detailed or fancy, and it shouldn’t take hours or days to create.
Start by keeping track of how much you spend over one month in basic categories like rent/mortgage, utilities, vehicle, food, household expenses, personal items, entertainment and any other spending categories which might be seasonal like saving money for the holidays. The more accurate you are in tracking current expenses, the more accurate your budget will be.
Your credit card and bank statements will tell you how much you spent at a store but won’t break down an itemized list of your purchases. Trent Hamm, founder of The Simple Dollar, drives home this point with the following budgeting 101 advice:
“If you spend money in any way, record it in some fashion by saving the bill statement, a copy of the check, a receipt from the shopping trip, or even by simply writing it down on a sheet of paper. Every single penny should be accounted for.”
Among other things, a budget will help you make the best use of your income. It’s absolutely integral to know what your income is and how much money you have coming in every month. Add up your wages, money from side gigs, spousal support, child support, business income, and investment income. If your monthly income varies, make a close estimate based on an average of the past few months.
Now it’s time for a financial check up: track your expenses, try to identify places where you can cut back. Maybe you aren’t using your gym membership as much as you used to or, maybe you have other monthly recurring subscriptions you’ve neglected to cancel. At least once a year, look into lowering other bills such as cable, insurance, and cell phone service.
According to Phillippa Lally, health psychology researcher at University College London, it takes the average person 66 days to form a new habit. In the beginning, following your budget will be difficult. Stick with it. Pushing through the initial few months will be well worth the effort, especially when budgeting becomes second-nature. If you get stuck, check out these tips on how to stick to your budget.
Whether you know it or not, your financial health is affecting your quality of life. Creating and following a basic budget can help improve your financial health and positively impact other areas of your life. Try scoring your financial health to see where you stand, then set goals to keep your budget and personal finances on the right track.
Interested in learning more? Check out these related blog posts:
Get prepared for the next 12 months with our year-end financial checklist.Read More
Do you know the difference between a good credit score and a great credit score?Read More
Several financial movements and economic events surprised the world in 2021. Here’s what you need to know ahead of the inevitable holiday conversations.Read More