One word that nobody wants to hear is “budget”. However, it’s important to understand that we have to set a limit somewhere. Having a budget does not mean that you can’t get those sunglasses you’ve been wanting for the summer or no more eating out.
A budget is an EXACT opposite!
Creating a budget allows you to look ahead and see how you are able to spend those funds.
If you get paid bi-weekly then you should be creating a budget bi-weekly prior to payday. This helps because if you are out sick or somehow will not have the amount you normally have you can plan for it and it won’t be a surprise. That’s why I LOVE budgets. Planning ahead helps when their maybe something unexpected.
Creating budgets is one of the most important tools in building a successful financial future.
To help get started on creating a budget, let’s first pick a budgeting system. This is used to create, track and monitor a budget.
I am old fashioned and like to use a notebook and pen. I write out all my monthly bills then write my monthly income and see how much I will have leftover.
You may also use a spreadsheet in Microsoft Excel or Google Docs.
free online software such as Manilla and Mint.com
financial software like Quicken
Now that we know WHERE we are going to create our budget, let’s look into HOW to actually create one.
1. SET GOALS
Are you trying to save up for something specific like a vacation or an expensive pair of shoes? Or do you simply want to make sure that you have some saved by the end of the year? Come up with some goals, no matter how big or small. For example, I want to get a MacBook (Yes, I do not have one), so I will be saving $130 per month until I get one.
2. CALCULATE YOUR INCOME AND EXPENSES
You need a plan to reach those goals in the previous step. List all your income sources and include your salary (after taxes). Add those up and that is your total monthly income. Now, determine what is fixed (a monthly expense that doesn’t change like rent or mortgage), variable (changes month-to-month like groceries or gas), or discretionary (optional expense such as a gym membership or Netflix).
Please note that if you have credit card bills each month be sure to include them in your monthly expenses.
3. VIEW YOUR SPENDING AND BALANCE YOUR BUDGET.
The overall goal in budgeting is to make sure you do not exceed your monthly income. If there is more money going out then coming in then there will need to be some adjustments. Keep a close eye on your accounts and be sure nothing was charged more than what needed to be. You can check your bank statements online if you opted for paperless through your financial institution.
4. REVISIT YOUR ORIGINAL BUDGET.
You can use a monthly budget for a month or two. After that, you should create a new one. Like I stated earlier, I like to do a budget bi-weekly if I get paid bi-weekly. I like to do this because unless you get paid monthly you will not have your money at once and it’s split up. Same for if you get paid weekly, I highly recommend a weekly budget because you will get an even smaller amount that could make it hard to keep track of.
You may also get a promotion, need car repairs, or your fur baby is sick and needs to see a veterinarian.
Great job to you for even taking the steps to want stress free finances!! Once you have adapted to the budget and have done it for a few months. It may be time to start thinking of including a savings plan for unexpected things. You can start with as low as $10 every time you get paid. Just keep in mind to remain realistic and don’t be afraid to make changes. A budget just creates a balance.
It’s me! Great job for taking the first steps! Below is a list of the benefits of budgeting. ↓
BENEFITS OF BUDGETING
Budgeting can improve your life :
Reveals waste. Creating a budget sheds light on areas that many people neglect on a day-to-day basis.
Creates new habits. When people get a clearer picture of how they’ve been using their money, it allows them to shift expenditures into different categories, making them more conscious of unnecessary spending.
Reduces stress. Finances are one of the top stress-inducing situations. When there is a sense of control over the money coming in and the money going out, the stress can transform into a feeling of empowerment.
Educates. Having a budget allows people to view money as a tool, shifting the mindset to focus on long-term goals and future needs.
I certainly hope that you enjoyed this post. I know that it’s not a fun and exciting topic, but we have to talk about it sometime. I hope that you can share this with family and friends and please join the B.F.N email list to get notifications of new posts and exclusives. Also, do not forget to follow on Instagram @break.freenomad.blog. Feel free to DM me the topics YOU want to know about! See you soon!! Thank you.