If you have ever thought to you yourself “if I could only make more money, then, I could save. Well, you are certainly not alone. One of the most difficult part of sticking to a budget is actually creating a realistic budget that will create real results. If you have the potential to make an income, then, with the right tools and information, you also have the potential to create a budget. In this post I will discuss 6 steps to creating a successful budget with any income.
1. Write down all of your expenses
Before creating a budget, it is important to write down all of your monthly expenses. This includes mortgage/rent, utilities bills, loans payments, child care expenses, transportation etc. The idea is to identify how much money you need to maintain your financial priorities each month.
2. Keep track of your spending
After writing down all of your monthly expenses, you will want to keep track of all of your spending. You can do this by keeping all of your receipts or by deciding to only use a debit card to make purchases to and calculate total amount spent for the month. Once you are done with the calculations, subtract you monthly expenses to identify areas of over spending and areas where you can decrease or eliminate spending altogether.
3. Set a clear financial goal
While budgets are great whether you have a goal or not, they are much easier to maintain when there is motivation behind the behavior. This is why it is important to set a goal that you can look forward to. For example, my goal is to take a trip to the Caribbean in the summer. I know that the trip will cost about $1600 and I will need to purchase a passport that will cost $135. I will also need approximately $500 for trip additional expenses. This will bring the total trip expenses to $2235. I know I have 7 months to prepare for the trip, so my financial goal is to save at $320 per month. Set your goal and begin working towards it.
4. Creating a budget
Now that you have written out your monthly expenses, identified your spending habits and have set a financial goal or goals, you are now ready to create your budget. Your budget should include all of your monthly expenses. Remember, these are expenses that must be paid every month. Subtract this amount from your monthly income. If you have money left over after subtracting you expenses, then can add money to your savings. If you still have money left over after subtracting expenses and savings, then you can add an extra-curricular spending fund. For example: Jim makes $2200 a month. After adding his monthly expenses of $1500, he has a remainder of $700 left. Jim wants to save $500 per month. He now has $200 let for the month. Jim decides to divide the remaining $200 between a gym member, eating lunch at work and bi-weekly dates with his girlfriend. If your expenses is more than your income, you may want to consider making minimum payments on loans repayments, cut back on expenses, eliminate expense or finding ways to increase income.
5. Utilize Budgeting Apps
With all of the budgeting apps that are available today, budgeting does not have to be the boring task of punching numbers into an excel sheet. There are many budgeting apps that will calculate your expense and allows you to keep track of your spending and if you stay with the free version, you do not have to pay anything. Apps that assist with creating budgets are the EveryDollar app, Mint, Goodbudget Budget planner, Clarity Money, etc. There are, honestly, hundreds of budgeting apps available. Some Apps are better than others, but they will all allow you to create a simple budget that will help you budget and keep track of your money so that you can reach you financial goals.
I hope you found this post helpful. You are one step closer to reaching you financial goals.