If you’ve ever read any sort of financial advice, you’ll already be aware that there’s one uncomplicated rule to the whole shebang – you have to have a budget. This will serve as a sort of roadmap for your money and put it to work for you. Getting started might seem a bit complicated, but it isn’t. Read on for tips that will keep you on track.
Dive Into Current Habits
Before creating a realistic budget, you need to know a bit more about how you currently spend. For example, you know that you pay for life insurance, but what you might not know is the answer to the question – is life insurance taxable? This kind of thing is critical because if you don’t have a realistic budget, it’s essentially nothing more relevant than a wish list. You won’t know if it’s realistic either until you have a clear picture of where your money goes. The tip here is to track your spending for a minimum of 30 days in preparation for making a budget.
Even though tracking what you spend will show you where your money is going from one day to the next, a budget also needs to factor in money for expenses that might be a bit irregular, such as birthdays and holidays. It isn’t unheard of for people to borrow more than $1,000 during the holiday season, and this money will need to be paid back…with interest. If you budget throughout the year and plan for these irregular expenses, you’ll not need to borrow money to finance them. Other irregular expenses might include things like property taxes, any professional or homeowner’s association dues, vacations, and insurance premiums.
Add Your Income
When it comes to budgeting, it’s all about your income and making the most of it. This means that you’ll need to know exactly what you have coming in. There are even budgeting apps that can help with this. You’ll need to factor in all of your income regardless of where it comes from, including income from any investments, business income, child support and/or alimony, and anything you make with your side gigs along with your normal income from your main job.
This step is critical whether you’re making a budget for your business or your personal finances. Most of the time, people make budgets due to them wanting to be able to do more with the money they have. Typically, this will involve reaching financial goals that might have to do with saving for vacations, paying off debt, saving for college, a down payment on a house, or even retirement. When you set these types of goals for yourself, your budget can be aligned around them when you determine how much you need to set aside each month to achieve those goals.
Review It Monthly
Finally, it’s crucial to check your budget each month and make any adjustments that might be necessary. Look at how well you kept to your budget for that month–see if you had anything left over, and where you may have spent too much. Learn from this information and adjust the budget accordingly. Just as your life changes over time, so will your budget. However, once you’ve established a good baseline budget, making those changes is easy.
Whew! Now you’ve gone through the tips for creating your first budget. As you can see, it’s nothing to feel overwhelmed about. Once you’ve gotten the hang of it, it’s incredibly simple. Now, you have the knowledge you need to quit working for your money and start making it work for you.