How to Create a Budget
Contrary to popular belief, creating a budget can be fun. As we get older we need to prioritize what we spend. It’s not fun in the short-term but in the long-term it’s rewarding. Planning allows you to create goals, pay off debt, contribute to an emergency fund and invest. Heed these steps now and you will be on the right track to responsible spending.
- List Essential Expenses
Make a list of all of your expenses starting with the most important. Essential expenses like rent, mortgage, debt and insurance are first. Next, evaluate your family expenditures like medical bills, groceries, babysitting and daycare. Compare your income accordingly. Does your income match what you spend? If you can barely keep your head above water every month, it’s time to cut back on spending or earn a second income. Hire a financial advisor to help you find a strategy to keep your budget on track. Ideally you should have enough money at the end of the month to contribute to an emergency fund and a retirement account. If you’re in good financial standing, a financial advisor can even help you invest in the housing or stock market.
- Minimize Unnecessary Spending
You may wonder where all your money goes at the end of the month. Without a budget, your paycheck will disappear into the ether. You’ll wonder why some months you have more money and other months you have less. This isn’t a good habit; reckless spending distracts from long term financial goals. To keep track of your spending use an old-fashioned checkbook or download a money management app like Wally and a savings app like Acorns. Wally is one of the best apps to track your spending habits and Acorn automatically invests the change from your daily purchases into your bank account. Download Wally and see how much your small expenses add up. You may be surprised; a hundred dollars can disappear quickly in a weekend. Try simple habits like making your own coffee in the morning instead of going to Starbucks or cutting back grocery spending. If you have enough wiggle room, prioritize the little things you want as a tradeoff for other expenses.
- Envision a Goal
Goals move people forward. What good is money for if you don’t have something to strive for? For some it may be purchasing a home or car, and for others it may be a backpacking trip through South America. Wherever your interests lie, create a long-term goal to achieve. Plan your dream wedding on Pinterest or visit travel websites and dream about the possibilities. When you start dreaming, suddenly those small expenses don’t seem as important. Create a goal now and you’ll thank yourself in the future.
- Earn Money on the Side
If you’re driven toward a goal and you want to get there faster, try earning some extra income on the side. Turn your knitting hobby into a small business on Et sy or walk your neighbor’s dogs for extra cash; apps like Wag allow you to create a profile to become a professional dog walker. If you don’t mind driving, Uber and Lyft are great avenues for extra income. Rent out a room in your home to AirBnB or tutor students on weekends. Technology has made it easier to put yourself out there so try something new and earn more money.
- Reward Yourself
Budgeting isn’t all about restricting yourself—it’s also about rewarding yourself. Small rewards make budgeting worth it as you work toward a goal. The difference between rewards and frivolous spending is the way you plan it. Rewards are planned expenses. It may be a nice pair of shoes you budgeted a few months for, or it could be a weekend getaway with friends. Rewards make it easier to save and enjoy your new lifestyle.
Budgeting is a way to take control of your future. Beat the budgeting blues by following these steps now. If you need help reach out to a financial advisor or tax experts at a reputable company like Community Tax.