Good budget management will better prepare you for the future. Begin with a goal you have. Make priorities based on your needs and wants then have a plan to bring it into action. Budget management will have positive impact on your financial health.
Why budgeting is important
Everybody should have a budget. If your goal for the future is to have financial independence free from the burdens of wage labor and part-time positions, you’ll need a budget. One reason you want to commit to start budgeting is no one knows what tomorrow brings. Good budget management will better prepare you.
Even if your financial goal is not to be rich you should at least have a funds saved for the unexpected. Sick days, weddings, baby showers, birthdays, oil shortages, which when you think about it aren’t all that unexpected. Affording yourself this much (change the language so they can identify an action) financial independence will reward you the freedom you’ll undoubtedly enjoy and appreciate. By starting with your budget plan today (there’s our keyword) you will not only improve your financial health, but also a daily ease of comfort as well. Budgeting is important because you save more money and are more likely to create wealth. Knowing that you deserve this and owing it to yourself.
Where did my money go?
First things first, get an idea of your spending habits. Track your finances, every dollar that comes in and every dollar out. You can’t accurately budget otherwise. There are a few simple methods you can use to start on your budget plan today. An ideal time period to track is over the course of a full month. First grab last month’s bank statements. This will help you to get a clear picture of your spending.
Begin this exercise by grabbing two separate color highlighters. Preferably, one red and the other orange-yellow. Before you can know your financial status you must spend a minute reading over your statement. Give yourself a moment to review your bank statement. You will want to have an idea of your personal spending behavior before you can take control of it. Get an idea of what kind of buyer you are.
Now, in yellow highlight deposits into your account. This includes payroll deposits, transfers from a friend or relative, store purchases refunds. After that, in red highlight all transactions going out. These are withdrawals, ATM withdrawals, purchases, payments. Congratulations, you finished the first exercise.
Having a clearly defined goal, as earlier, will help you get clear on what is important to you and in prioritizing it. Make a list of goals and priorities you have for why you decided to start budgeting.
At the end of every month you want to take a look at your bank statement and consider your budget.
Take the time to consider, how much of your income is going to what. Do you splurge a lot on entertainment? Or, is it clothing? A little self-reflection is good. This is not to be too hard on yourself. Instead this simply to get a better picture as to how personal finances is in your control. From here you can start deciding what are your must haves and what are your wants.
Get clear on how much of your income you are allocating to a particular area of your life. A rule of thumb is designating 10-percent of each paycheck into a savings account. This way you can pay yourself first, this is a way to prioritize your needs over your wants. By allocating a certain amount each month you’re changing the measure of your financial status for coming events.
50 30 20!
Here is a critical step. Here you can consider what you have placed priority on during the past month. Of course, you can look on top of a bank statement and see deposit and withdrawal amounts. While this is useful, you want to know whether you’ve brought more value in or less that has been going out. Here you have the choice to get an idea of your own behavior which makes it an important budgeting step.
What do you notice?
Are there more red marks than green? If so, by how much? How often are you spending? Could you be spending less? Are there opportunities to save? Start with categories.
Categorize here with rent payments, grocery costs, car payments and so on. Have an idea. Things like internet and phone bills might well be considered expense. Things you need to have. Keep in mind your goal. What would happen or how much would you save if you spent only half of what you did on morning coffee. Perhaps, it might be time to brew your own cup. When it comes to savings, you know best where spending can be cut and how much could be divested into your savings.
After the essentials are taken care of you can start saving for things you enjoy doing. These are leisure activities such as going out o concerts and socializing with friends. You should also consider saving money for various reasons that I will sum up shortly. An emergency fund for the unpredictable parts of life. You should always have funding habits for a safety net. This will give you a sense of comfort. Perhaps, there is a bigger purchase you’d like to save up for, like investing in a quality laptop for school or a house. Also, your future plans like retirement.
A good way to budget.
Budget management is a powerful first step to begin for taking control of your finances. Now that you have gone through the first n steps you’ll want to broaden your view. Regardless of salary, individuals who budget plan are more likely to achieve financial independence. Creating a budget for short-term is good, evaluating your expenses and adjusting your budget to grow savings goals is even better, and this is budget management.
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