Budgeting Tips: How to Budget Your Money
Knowing how to create and follow a budget is a crucial life skill everyone can benefit from. Although it doesn’t sound fun, knowing how to gain control of your finances is an important part of success. But that doesn’t mean budgeting is about depriving yourself. Instead, it’s about creating a spending plan based on your income and expenses. Here are some tips to help you properly budget your money.
Understand your relationship with money
Tracking your income and expenses paints a clear picture of how much you save or spend. Once you spot patterns, you can identify where to adjust. Maybe you spend less than you earn (way to go!) but you’re paying for that Netflix subscription that you’re no longer using. Or maybe your daily coffee treat can be made at home a few days of the week to save. Whatever the case may be, figuring out where you’re spending your money is the first step in making adjustments to save money.
Save enough for the future
A good budget coaxes you to earmark money for an emergency fund and savings goals like a vacation or retirement. It’s always better to have more than you need in savings rather than not enough. Saving even a small amount each month can make a difference over time.
Get — or stay — out of debt
Mapping out expenses in advance reduces the risk of overspending and can help you pay off debt you already have. Should you find yourself in debt, one tip that may be helpful is to pay off the smallest debt first. This will keep your smaller, more manageable debts from snowballing into larger ones. Once the smallest debt is paid off, move on to the next smallest.
Stress can often cause us to make financial decisions that may not be in our favor. Budgeting isn’t a cure-all, but it can give you a blue print to follow to help manage financial decisions and prepare for challenges.
Creating a simple budget
If you’re not sure where to start, the 50/30/20 rule can help you create a simple budget. The basic rule of thumb is to divide your monthly after-tax income into three spending categories: 50% for needs (rent, utilities, car payment), 30% for wants (shopping, travel) and 20% for savings or paying off debt.
For more budgeting and savings tips visit this post by ABLE United.