If you’re like most people, budgeting is a scary prospect. You probably have a vague idea of how much money you make and where it all goes, but if you sit down and look at your spending habits in detail, the enormity of the task ahead can be overwhelming.
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But don’t worry: It doesn’t have to be that hard. With some planning and some work on your end, budgeting can be an empowering experience that helps your family thrive financially, you need to figure out what works best for you. Here’s how:
Decide what you want your budget to achieve.
When starting, it can be helpful to think about what you want your budget to achieve. Is it just about ensuring all of your bills are paid on time? Or is it about saving for a vacation? Maybe you’d like to pay off some debt or save for a house. Whatever the goal, deciding what you want from your budget will help keep things on track when times get tough.
Whatever your goal is, remember that setting up a budget doesn’t impact whether or not it gets achieved, you do.
Find out where you stand.
- First, you need to find out where you stand. Start by looking at your income and expenses. Then look at your spending habits, credit card balances, and retirement savings. Finally, assess your current debt, net worth, and any financial goals coming up shortly.
- Once you have all this information, it’s time to create a budget.
Start a savings plan.
A savings plan allows you to set aside money for the things you want but might not be able to afford right now. A good savings plan makes it easy for you to save regularly and consistently over time and helps prevent impulse purchases that would otherwise waste your hard-earned money.
Start by creating a budget that works for you. When the time comes to buy something new, ask yourself whether there’s an alternative way of getting what you need, for example: would borrowing from a friend or family member be acceptable?
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Factor in variable expenses, like clothing and gifts.
When it comes to variable expenses, you should try to be as specific as possible. Clothing is a big one that often gets overlooked. But if you know, you’ll be buying school clothes for your kids or replacing a few pairs of shoes during the year, a factor into your budget now. The same goes for gifts, if Christmas is approaching and your family is traditional about giving gifts on every major holiday or birthday, plan so you don’t get stuck paying for everything at the last minute when there’s no cash left in your account.
I’ve found that setting aside small amounts each month helps me save up for these kinds of expenses without feeling like I’m depriving myself of anything else important (and also keeps me from overspending when they roll around). For example: If I know my niece’s birthday is coming up in September and she loves movies (what girl doesn’t?), then perhaps I’ll put $100 into an account labeled “Birthday Girl” rather than spending all my money on other things throughout the month.
Cut spending if necessary.
If you’re struggling to make ends meet, it’s time to take a good look at your spending habits and consider cutting back. You can start saving money in many ways: You might need to cut out unnecessary spending’s as luxuries and things that don’t add value to your life. Perhaps it’s time to give up the cable package (or at least downgrade it), or you could use a cheaper cellphone plan. All these things together may allow you more breathing room in your budget. Even if not, cutting back on some of these expenses will help ease the strain on what little income you have left over after paying for necessities like food and rent/mortgage payments.
When deciding whether or not something is worth spending money on, ask yourself if this item adds value to your life, and then decide whether that added value is worth whatever amount of money I have available for this purchase right now. If so? Go ahead. If not? Save those dollars for something else.
Could you keep it simple?
The best budgets are the ones that are simple, straightforward, and easy to understand. They don’t try to do too much and don’t try to do it all at once.
The best budgets also allow for flexibility. You should be able to change them (within reason) as your income or expenses change. And you should be able to adjust them as situations arise, or new ideas come along.
We hope this article has helped you understand how to make a budget and stick to it. Remember, your budget is a living document, it can be changed and updated as needed. If you struggle with sticking to your plan, don’t give up. The key is finding what works best for you and sticking with it until things get more accessible (and they will).