Only 30% of people in the US have a long-term plan for their money. Earning money is only half the battle – you have to learn how to spend it responsibly too! If you’re looking for a beginner’s guide to budgeting, you’re in the right place. Keep reading for the top budgeting tips to see how you can save money and experience financial freedom.
Gather All Forms of Income
The first step is figuring out the details of your income, including how much you’re making, where the money is coming from, and how often you’re paid. Whether you record this information on paper or on a computer, it’s helpful to see it all in one place so you can visualize your situation more clearly.
This could include income from a full-time or part-time job, as well as money received from investments or sales.
Add Up Your Expenses
Next, it’s time to figure out what your total expenses are. These are the things you need to live, like rent or mortgage, utilities, food, transportation costs, insurance, and so on.
Find out how much each of these expenses costs each month and if there are any that can be reduced. Don’t forget any loans or debt that needs to be repaid as well. While there are ways of dealing with debt (like an offer in compromise), saving up enough money to begin paying it off is a helpful start.
Create a Spending Limit
Once you’ve figured out how much money you receive each month as well as how much you need to pay for life’s necessities, you can calculate your spending money. This is the money that’s left over and doesn’t need to go to expenses. Instead, it can be spent on things like entertainment, hobbies, or eating out.
To ensure you don’t go over this spending limit, it’s helpful to create a chart or list of your top personal spending priorities to plan how to spend this money. While you deserve to spend money on things that will make you happy, you don’t want to overdo it and end up spending more than you’re making.
Decide How Much to Save
Some of the best budgeting advice is to take a portion of the money left over each month and put it into savings. Whether it’s a large amount or a small amount, every dollar adds up and can help you if you need it later on.
A great way to build up a savings account is to decide how much you can afford to put into savings each month and set up automatic transfers in your bank account so that money is put into savings without you having to do anything. Once that money is in savings, try not to spend it unless it’s an emergency.
Reevaluate Your Budget Frequently
Once you create a budget, don’t expect to use that same budget forever. Circumstances change, and so will your money flow. For example, if you get a raise at work or find out you have a child on the way.
Look over your budget at least once a year and update it according to your current situation to be sure it stays as accurate and helpful as possible.
Budgeting Tips to Help You Save
These budgeting tips will help you better understand your income and expenses so you can spend money on the things you need and want most.
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