5 Steps To Begin Budgeting!
Budgeting has such a negative connotation, but it is an absolute must on your journey to financial freedom. How I see it, budgeting is a financial roadmap!
If you have struggled with budgeting, these 5 Steps will help you to get started:
5 STEPS TO BEGIN BUDGETING
List Everything: You won’t understand how to budget if you cannot gather all of your income and expenses together to begin. Did you see how I did not mention just bills? That is because a list of bills is NOT a budget. It is important to include everything you currently put money towards each month, whether that’s paying fixed expenses such as rent, utilities or transportation costs or towards variable expenses such as eating out at restaurants, your grocery budget and your random snack runs. Once you have completed this step, you will be able to see if there are any additional funds you can allocate towards financial goals such as savings, paying off debt, investing or all three!
Choose a Budgeting Strategy: There isn’t a one size-fits-all strategy when it comes to budgeting. There are various budgeting strategies out there and I’ll list two popular ones below:
Zero-Based Budget: All income is assigned to each budget category (expenses, savings, debt, investing) for the month. It does not mean your bank account will be at zero, but it means you have found a “home” for all of your income.
50/30/20 Budget: Your take home pay is split as follows - 50% NEEDS, 30% WANTS and 20% SAVINGS/DEBT. Some people switch the 30% and 20% depending on their personal needs.
50% Needs
Examples are: Housing, Utilities, Transportation, Insurance, Childcare, Minimum Debt Payments
30% Wants
Examples are: Entertainment, Eating Out, Personal Spending, Travel
20% Savings/Debt
Towards an emergency fund/other savings or paying down extra on debt
Track Your Expenses: Finding a tracking strategy that works for you is imperative to succeeding as you budget
Choose a Budgeting Frequency: Ensure you are budgeting at the correct frequency. What the heck does that mean? It means you will budget by a set time period each time. Example: you can choose to budget by paycheck, every month, weekly or bi-weekly, whichever works!
Select a Budgeting Tool: This is an important step most people miss. You may not be an excel guru, but that does not mean you can’t budget effectively. Find the best budgeting tool for you. You can even consider doing a combination. Try out budgeting apps, budget sheets, spreadsheets or even a good ole notebook!
I have been budgeting for over six (6) years and I would not be where I am without having a functioning budget that reflects my values and the things I enjoy!
