A Helpful Guide to Balancing Your Budget
Perhaps one of the most daunting tasks that comes with adulthood is learning how to budget your finances. But, as scary as it can be, budgeting is also a crucial step toward creating a secure, healthy financial lifestyle.
Whether it’s trying to build up your savings, buying a new house, or just trying to afford groceries every week, a clear big-picture view of your budget can help you to make confident financial decisions.
The Benefits of Budgeting
Getting your finances under control can provide a whole bunch of benefits, such as keeping you:
- Focused on your financial goals
- Aware of debts you owe
- Prepared for unexpected expenses
- Aware of what you can and can’t afford
- In control of your own money
With the right budget plan in place, you can rest easy knowing that you’re prepared for short-term—and long-term success.
How To Get Started With Balancing Your Budget
The pathway toward creating a balanced budget will look different for everyone. The key is to make your current finances work for you, and not try to mimic the budget or lifestyle of someone else.
Here are some budgeting tips that can be beneficial for everyone:
No. 1: Know Your Income
You can’t start budgeting if you don’t know how much money you’re working with. So, the first step is to calculate all of the income your home is bringing in monthly. This number should only account for income after taxes, sometimes referred to as your “take-home pay.”
This step is important so you can get the full picture of your resources.
Income can come from many different channels, whether it’s a paycheck from your main profession, side hustles, government benefits, child support, or anywhere else you receive regular payments. Remember that you’re accounting for the full monthly income of the total household. So, if you have a partner or someone else who shares a financial burden with you, you should factor in their monthly amount as well.
If there is a source of income with a value that fluctuates then you should account for an average amount that’s on the lower side, so you’re never overestimate how much money you’ll have.
No. 2: Figure Out Why You Want to Budget
It might sound a little simple, but often the key to a successful budgeting plan is having clear, attainable, and often challenging goals.
Understanding what motivates you to save money can be the difference between staying focused and on track with your objectives or burning out and overspending when you shouldn’t. It’s important that you have some strong savings goals to hold on to when money is a little tighter and savings doesn’t feel easy.
If you aren’t sure what objectives you’d like to set for yourself, here are some things to consider:
- What is most important to you? – Do you want to prioritize traveling? Homeownership? School? An emergency fund?
- What’s your next major expense? – Do you have any upcoming events or big purchases?
- Which objectives are short-term and more easily attainable? Which are more difficult and therefore long-term?
No. 3: Track Your Current Spending
It’s not enough just to know how much money you have coming in each month; you also need to know exactly what’s going out. This way you can seek out your high expense areas and figure out where it might be easiest to cut down and save.
What are your consistent monthly expenses? This includes things like rent, mortgage, car payments, utilities.
Next, what are your varied expenses? Such as groceries, gas, entertainment, and recreational activities. This category of spending is likely where you’ll find potential areas to save.
Look at your credit card or bank statements to see exactly which transactions you’re making and record any patterns you observe. Then you can categorize your expenses into necessary and luxury spending. Often, people find it helpful to keep this information in a spreadsheet for organization and safekeeping.
No. 4: Set a Spending Margin
Keeping track of every single cent you spend can get pretty exhausting. Save yourself the unneeded stress by factoring in a spending margin to give yourself a little breathing room.
You can do this by calculating what money you have left over after your planned monthly expenses have been paid off. This is your buffer because there is nothing depending on that money.
Your margin might fluctuate from month to month if your income isn’t stable, so it’s important that you’re cautious about overspending.
It’s possible to stay financially responsible while also giving yourself a little room to spend money on unplanned things here and there. Just make sure you don’t overdo it, and you stay within your margins.
No. 5: Plan Out Your Monthly Budget
Now that you’ve learned why you want to budget, what income you’re working with, and what your monthly costs are, it’s time to map out exactly where your money is going and how you’ll be saving each month.
Budgeting can vary dramatically from person to person or household to household. Maybe your income is varied, or maybe you have a full-time job with a steady salary. Maybe you’re low on funds at the moment and really need to stretch each dollar as far as it’ll go.
This is where all of the info you’ve gathered comes together.
No. 6: Make Adjustments to Stay on Target
If you’ve been following your new budgeting plan for a while and still find yourself struggling, don’t be afraid to make adjustments until it’s working for you.
As stated earlier, the most obvious place to start when cutting down on spending is with non-necessary expenses. If you find yourself spending money on a lot of “wants” rather than “needs,” then this is probably where you should be focusing your saving efforts.
If you’ve already addressed these expenses, then you’ll have to look into your bills and other fixed expenses. Maybe there are areas where you can get a better rate or switch your payment plans. For example, consider shopping around for different insurance policy rates, or negotiating a smaller car payment amount. Often lenders are willing to work with you and your circumstances as long as it means you’ll continue to make regular payments.
Find as many little savings areas as you can. Even if they seem insignificant, they could provide a big trade-off in the long run. Remember, any bit of savings can make a big difference and will add up to provide you with a cushion of financial security.
If you’re looking for a side hustle that can help lighten the load, consider completing Missions using the Mobee App. Complete tasks at your normal grocery stores and earn rewards that you can put toward restaurants, groceries, and much more.