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You’ve probably heard this before. Budgeting is important, but how… do we actually do it? Life is unexpected. A budget can help you prepare for emergencies, save for things you want, and make sure you’re paying off bills on time and in full. Budgeting can be daunting, but it doesn’t have to be! Creating and following a budget can help get your finances on track.
Here are some tips to help you start budgeting:
Start by evaluating your current spending: Look at your bank and credit card statements from the past few months to get an idea of where you are spending your money. Make a list of regular expenses, like rent or mortgage payments, car payments, insurance, groceries, subscriptions, and debt payments. Also track your irregular expenses, like clothes, entertainment, and travel. And don’t forget to account for annual expenses! This may include car registration, holiday gifts, and anything else that doesn’t happen every month but still costs money.
Make sure you know the difference between gross pay (before any deductions) and net pay (what you actually take home after taxes). If your income varies month-to-month, use your average monthly income to make your budget.
Determine your financial goals: What do you want to achieve with your budget? Do you want to save for a down payment on a house? Pay off credit card debt? Build up your emergency fund? Knowing your goals will help you create a budget that works for you. Budgeting can be a helpful tool to get your finances on track. By evaluating your spending, setting financial goals, and creating a budget, you can take control of your finances and achieve your financial goals.
Create a budget: Everyone’s budget looks different. You can write it down, make a spreadsheet, whatever works for you. Once you know where your money is going and what your goals are, you can start creating a budget. Start by allocating funds for each of your expenses, both fixed and variable. Make sure to leave some room in your budget for unexpected expenses. Once those are covered, you can then find your disposable income - what you have to spend on wants. The goal is to make sure your spending doesn’t exceed your income. If it does, you may need to find ways to cut back on your spending or increase your income.
Stick to your budget: Once you have a budget in place, it’s important to stick to it. That means being mindful of your spending and not overspending in any one area. If you find yourself struggling to stick to your budget, consider cutting back on some of your variable expenses, like entertainment or dining out.
There are a lot of helpful budgeting tools out there. Find what works for you and stick with it! Budgeting is a lifelong skill that can help you navigate your finances and reach your financial goals.
Need help getting started? Explore fitmoney.org for more resources.