Determining how much money to save can be a difficult and daunting task. Keeping track of your finances is important and skill essential to success. If you’re looking to figure out a budget for yourself, here are some tips to get you started.
- Figure out why you want to budget: Creating a budget is easier to understand if you have a solid foundation for saving money. Making a list of goals is the best way to start your budgeting journey. Such goals might include: not living paycheck-to-paycheck, ending worry/fights over money, reducing overspending, getting out of debt, determining long term financial goals or even saving for retirement.
- Figure out where to cut costs: Writing a list of your current expenditures and monthly bills is the next step to determine what must get paid and when. Put the items into two columns: a column for “must be paid” and “could be eliminated.” Perhaps you subscribe to multiple services for television or beauty boxes – considering if you want to skip a few months or cancel the service altogether, if this area is one in which you can reduce spending.
- Add up all your income: An important step not to be missed is writing down your income. Include all the money you have coming in, including but not limited to wage, side gigs, alimony, investments, and business. Determine how much money comes in each month and choose a number which is safe for what you earn on average or just in case of a bad month. This number is the starting point of your budget and can help reduce overspending. Take the number of income and figure out how much of it you can spend without feeling stressed or worried. Leave yourself a cushion for any unexpected emergency expenses which could arise.
- Identify extraneous or odd spending: the winter holidays only come once a year, but it tends to be a season in which spending is abundant. Also factor in annual payments for insurances and doctor’s visits or vet bills. Big goals such as retirement, college savings, paying off debt can also be included in this category.
- Create goals and save! Once you’ve established why you want to save and what your monthly spending can be, start saving! “Saving as much as you can” is standard advice, do what works for you!