Budgeting can be pretty stressful, especially when it comes to paying your installment loans. There are so many different things to consider and it can sometimes be difficult to stop yourself from overspending. As it happens though, budgeting doesn’t have to be something that some people are good at and others are not. With the right knowledge, anyone can budget their finances well.
If budgeting hasn’t been your strength up until this point, you don’t need to worry. Today, we’re going to do a deep dive into five steps that you can follow in order to be a superstar at budgeting your finances. Without further ado, here’s everything that you need to know.
Figure Out What You’re Earning
First of all, you need to have money to begin with in order to budget correctly. Figure out what your income is after tax is deducted from your salary. For some people this may be a little more difficult, especially if you get paid hourly or you get bonuses. In this case it can often help to create an average, but if you can get a more accurate estimate then that will be the best thing to do.
Your income isn’t the only thing to consider either. You should also consider any other payments that you may get on a regular basis, such as interest, rental income and alimony. When you have all of this knowledge, you can then figure out what to do with the money.
Work Out Your Expenses
Now it’s time to take a look at your bills and see how much you’re spending every month. Figure out how much your housing costs, utility bills, food and transportation. You can then allocate money to other things for your leisure, such as going on vacation or buying new clothes. Figure out what subscriptions you pay for on a regular basis, and then you will have an idea of how much you are spending on average every month. You may use these.
|App||Fees and Minimum||Best for:|
|Personal Capital||Free||Monitoring wealth and spending|
|YNAB||$84 a year or $11.99 a month (after a 34-day free trial), free for students for 12 months.||Personal budgeting|
Work Out the Difference
Look at your savings and your outgoings. If you have more money going out of your account than what is staying in your savings, then you need to make a decision. Is it time to get a new source of income, or are you going to cut down your budget?
It can often be a little more difficult to increase your earnings, so for the time being it’s better to figure out how you can cut down your expenses. This may mean that you need to spend less money on dining out or buying new clothes. Perhaps it means that you need to reduce that Netflix account package.
Some people are saving more than they’re spending. That’s pretty awesome! In that case, you may not need to do much more unless you want to be saving more. In that case, you may want to look at some ways that you can reduce what you’re spending so that you can save more money each month.
What Are You Doing With Your Savings?
If you’ve cut down your spending or you’ve increased your income, then good news – you should now have savings! Here’s the thing: what are you going to do with that money you have saved? If you’re struggling with debt then perhaps it’s a good idea to pay off your debts, especially if they incur high interest rates. You may wish to continue saving. Alternatively, you can start spending money on bigger investments, such as home improvements and setting aside a fund in case of emergencies.
Budgeting is much more effective if you make it a habit. Try to keep within your monthly budget rather than constantly going over it, and it will eventually become second nature. If the budget doesn’t work then you can simply review it and figure out what changes need to be made. When you learn how to budget, you are gaining a skill for life, and it will certainly benefit your financial health.
If you’re still struggling with budgeting, there are things such as apps online that will help you to save your money. It’s worth trying them out, as long as they are legitimate.
Budgeting can seem difficult, especially when you have a low income. Fortunately though, it can become a lot easier if you follow the steps listed above!