Budgeting 101: Top 10 Tips for Making and Following a Monthly Budget
Never had a monthly budget before? Here are some tips to get you started.
Whether you’re deep in the throes of money woes or you’re just looking for a way to save a bit more cash, there’s one thing you can do to turn everything around: You need a budget.
1. Start by simply tracking your spending.
If you’ve never had a budget before, start by just tracking what you spend and where you spend it. This will give you a good idea of your overall habits.
2. Figure out where you can “trim the fat.”
Once you’ve been tracking your spending habits for a month or two, take a look at where you can make some improvements. Perhaps you get a coffee at Starbucks every morning that you can do without. Or maybe you can try having date night at home sometimes instead of going out to a restaurant every week.
3. Check your subscriptions.
Take a look at your credit card and checking account statements, and see which subscriptions you can take a break on. If you signed up for Amazon Prime and Spotify both, consider keeping Amazon and using Amazon Music instead of Spotify. If you have both Netflix and Hulu, consider keeping just one.
4. Cut back on utility bills.
Do you have the fastest Internet plan for home use? Is that necessary? Do you still pay for cable but don’t really use it? Do you have an unlimited phone plan but never use more than 2GB of data? Cut back on these expenses where possible.
5. Have a look at your food spending.
Where do you usually shop, and how often do you shop? Could you save money by shopping in person and not using a shopping service? Could you save money by going to a budget grocery store for some of your items? What about buying in bulk?
6. Set up a realistic budget.
Now that you’ve trimmed all the fat you can, it’s time to start setting up your actual monthly budget. You can do this by creating your own simple Excel spreadsheet or even making a spreadsheet on a piece of graph paper. There are templates available online as well. Basically, you need to look at how much you earn. Then, from that total, set aside the necessary amounts for bills and other expenses.
7. Figure out what you’ll do with the “excess.”
While it’s okay to set aside some spending money for things like “going out” (movies, restaurants) and buying personal items (toiletries, clothes), you should use the excess money that’s left over after your budgeted items for savings and paying off debt.
8. Save for emergencies.
Your “savings” category should be divided. Most financial experts recommend having a rainy day fund and an emergency fund. A rainy day fund is more for small expenses that you didn’t expect — like a broken refrigerator or a leaky faucet that needs to be repaired. An emergency fund is for serious emergencies like job loss or the need for a new roof.
9. Save for big and small purchases.
Could you use a new TV? Would your family life run a lot smoother if you had a second car? These are things that you should save for over time, so make sure to create separate budget categories for these purchases.
10. Fix problems as you go.
The process of creating and following a budget won’t be seamless. You’ll notice along the way that you may have allotted too much or too little for different categories, or perhaps you’ve forgotten necessary categories altogether. Fix these problems as you go. The main point is to keep going
Why Budgeting Works
It’s true: creating and learning to follow a budget can be difficult. Still, it’s an essential part of getting rid of debt, building wealth, and safeguarding your future financial security.
Use the tips above to get you started, drop what doesn’t work for you, and keep what does. As you make your way through the first few months of your budgeting journey, you will probably stumble and make mistakes. Understand that that’s okay and is actually an important part of the process.
Trying and making a valiant attempt to keep your finances under control is what’s critical. Going through the steps above will keep your budget and finances on your mind. It will let yourself know that the money you make and keep is important to you. Your budget reaffirms the good choices you do end up making. You’ll feel regret when you end up making bad choices, and a little regret is okay as long as you learn from it and change course accordingly.
So, try a monthly budget out for yourself, and do your very best to stay the course. We wish you luck!
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