Knowing how to manage your money means having full control over your own finances. You’ll be able to quickly reach your financial goals and pay off debts sooner than you thought, once you learn how to budget your money.
There’s more than one way to keep track of your budget.
There are online applications that can be of great help. You could go the old fashioned way and start a spending diary. But regardless of the method you choose to manage your income and expenses, the financial aspects you need to track stay the same.
Since personal finance isn’t taught in many schools, certain statistics are downright terrifying.
Everywhere you look, people are having money problems. While more and more citizens are getting into debt, less and less people are being able to save for retirement. Let alone save for a rainy day.
Having a budget to rely on every month should help you and your family feel safe when it comes to personal finance.
Money doesn’t grow on trees, so finding a balance between income and expenses is your best bet to stay out of debt and save enough to afford a nice living when you retire.
Learn how to budget money in 5 easy steps
Budgeting is actually pretty easy.
All you need to do is know how much income comes in, how much needs to go out, and how much you can save as you see fit.
Once you understand how easy it is to track all important expenses, you’ll be able to pay debt faster, you’ll less likely get into new debt and you’ll finally be able to be in control of your own money!
1. Fixed monthly expenses
There are certain monthly living expenses you simply must pay. Otherwise it’s very likely you’ll get in trouble and end up penalized financially or worse.
Here’s a list of a few living expenses you should jot down as top priority:
- rent or mortgage
- utilities (electricity, gas, water, etc.)
- debt (personal loans, student debt, car loan, etc.)
Any important monthly expenses that, if left unpaid, could affect your financial situation should be paid immediately. So, subtract these expenses from you total income right away!
Make sure you always pay them on time and learn how to rely on the rest of your budget for other expenses.
2. Flexible monthly expenses
While there are certain spending priorities you can’t adjust anytime soon, others might be more flexible, although just as important:
- groceries / food
- phone bill
- insurance costs (car insurance comes to mind)
- transportation (public or gas cost)
There are many more monthly expenses, I’m sure. These were just off the top of my head.
The main idea though, is the same: deduct these expenses from the budget you have left after paying the fixed monthly bills. If you’re left with too little or nothing, then adjust these costs according to your financial possibilities.
As opposed to your fixed monthly expenses, these costs usually leave you room to juggle. Don’t be afraid to be inventive and save money wherever you can!
3. Autopilot your monthly expenses
Once you know what bills need to be paid and when, just set them on autopilot!
Nowadays you have no excuse for not paying your mortgage on time or ‘forgetting’ about the phone bill!
Set automatic payments for rent, bills, insurance and you’ll definitely worry less about forgetting to pay on time.
4. Save money
To avoid future money problems and debt, setting aside a certain percentage of your total income is a smart financial move!
Once you know how much income you have, how much you spend on bills & other expenses, you can safely decide on how much money you can now stash away on a regular basis.
As little as $20 a month is a start. Well, more is better, but until you’re ready to budget on a serious level, anything you set aside is money saved! And in time, those $20 will become $40, and so on.
5. Spend what you can afford on fun… with cash!
Budgeting bottom line: you know how much you need to spend on fixed monthly bills, how much ‘flexible’ expenses you have and how much you would like to save for retirement, investments or whatever you have in mind.
Hopefully, you have some money left! Because the truth is, budgeting is only fun if you can also enjoy yourself while you’re still young!
Splurge on yourself from time to time. Go out. Buy something nice. Just make sure you spend cash and don’t max out your credit card!
It’s financially safe now to actually enjoy the money you earn. Once your important expenses are taken care of, you can have fun and enjoy yourself without worrying about next month.
What other budgeting tips do you have?
How do they help you keep a positive financial balance?
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