What is the first emotion that enters your mind when you hear the word “budget”? Do you roll your eyes? Flinch?
As a survivor of the same dilemma, I really want to make you view your budget in a new shade. A budget is a freedom as it’s a way of getting what’s most desirable to you. I bet, most of the people wouldn’t deliberately trade in a home or a golden chance to travel with loved ones for a lifetime of meals and interest charges. But that’s the choice we make when we waste our dollars on the expenditures that deserve low-priority.
There is absolutely no doubt that a budget can turn your dreams into reality.
But also, there are those who are in debt or trying to make a sense out their lives by living paycheck-to-paycheck. A good budget is certainly more essential to those who have limited financial resources as compared to anyone else.
This doesn’t change the fact that the budget is still your ticket out of chaotic financial life.
Let’s simplify this a bit.
How much is your monthly earning?
Begin by figuring out the exact amount that you bring in every month. Sum it up, including alimony, wages, child support, and other incomes.
Getting familiar with this amount is vital because this way you’ll know that you can’t spend more than this number, or debt will be back on its way, right towards you.
Enlist only necessary expenses
Next, prepare a list of your monthly requirements. These are things that you have to pay for, including property taxes, rent or mortgage, average utilities, minimum debt payments, child support, cell phone, transportation or parking for work, car payment, groceries, childcare, medications, and insurance. Spotify, Cable TV, etc. should not be on your list.
Evaluate past spending
It is important that a budget is practical. Sure, spending just $100 every month on dining out is reasonable, but if you actuallyspend $1000 each month, what’s the possibility that a $100 budget will be a success for you? In no time, you’ll be spitting out the word, “I Quit”.
The ideal way is to recognize your spending patterns and then start planning your budget while trimming this pattern. I promise you that this step will be worth your time.
Now with a grasp on your actual spending habits, bring together a list of your non-essential expenses. We’re not making any judgments or cuts yet. It’s just a list and it may include:
- Dining out
- Pet expenses
- Gym fees
- Health expenses
Accumulate the budget
It’s time to draft a budget.
It’ll make more sense if you call this a spending plan because that’ll be a more precise description of what it actually does. Write your total income and the essential expenses to see how much amount goes to every category.
You can put it like this:
May Income – $3500
- Electricity – $900
- Rent – $895
- Credit Card – $95
- Student Loans – $470
- Gas – $40
- Groceries – $450
- Childcare – $500
Now it’s time to list your non-essential expenses while taking into account your existing spending patterns.
Challenge yourself and decide if there are some things that you can eliminate or reduce. For instance, if you spend $450 each month on groceries, then could you commit to bringing that number down to $400?
Don’t be afraid to cut back on your spending habits. Simply, go ahead and list the new numbers.
The other half of your budget might look like this:
- Pets – $65
- Netflix – $10
- Hair appointment – $50
- Fun Money – $80
- Restaurants – $200
After adding all the expenses. What is the final amount? Is it less than what you earn? If that’s not the case, then you’ll need to cut more of your spending.
I am sure that most of you are wondering that it’s a lofty goal, especially in the situation of living paycheck-to-paycheck, but believe me, it’ll be worthwhile.
As long as you keep abreast with your final budget while making steady progress towards your savings and debt-payoff goals, you will be debt-free in no time.
An Emergency Fund
I’ll not waste your precious time explaining this one, as it is self-explanatory. All I’ll say is that even though I have saved this for the last, it is definitely not less important than any of the points mentioned above. In fact, an emergency fund can prove to your guardian angel at the time of your need.
What you’re waiting for, get started! Good Luck!