The word “budget” can instill quite a bit of fear in some people as it is often seen as a daunting and, at times, tedious task. Budgeting, however, is one of those skills that will help you have better control over your life, which makes it an incredibly vital thing to master. Not only will you be able to have an overview of your finances, but budgeting can also help you avoid or address your debt and even save some money for the future. Of course, when your financial health is less than optimal, budgeting and getting your finances in order can seem like an impossible task. But we’re here to help.
Without further ado, here’s how to budget your finances to better your financial health.
1. Assess your current financial situation
Before you can budget, it’s important to recognize what’s going on with you right now—financially speaking. Are you spending too much? Do you have debt? Are you looking to earn more? Take a look at where your money is going, and break down your expenses from the past few months. Chances are, there are things you might be unnecessarily spending money on. It could be your daily coffee run, or eating lunch out every day, but whatever it may be, see where you can cut back by identifying what your “wants” are, and what your “needs” are.
2. Organize your expenses
Whether it’s a spending tracking app or a monthly or annual budget spreadsheet, make sure you record all of your comings and goings. Noting your income and your expenditures will help give you a clear visual of your financial health. Your net income should be easy to list, since it should be the most regular number to appear in your budgeting. Your expenses, though, will require a bit more work. Don’t worry if you sometimes forget to log your expenses, as this is bound to happen; just try your best.
3. Come up with a plan
Once you identify where your money usually goes and how you can save on spending, you can then figure out what your money goals are. For many individuals, it’s to save more, but if you are in debt, then be sure to have a handle on that first. So, come up with a plan and come up with your short-term, medium-term, and long-term goals, but it’s important to be realistic with your goals. If you are hoping to save more, for example, then it will mean a smaller budget for “fun” expenditures that aren’t “needs.”
Regardless of what your plan may be, always have an emergency fund, and consider committing to putting a percentage of your income into your savings account every month to ensure you are saving some money each month. Also be sure to pay your bills on time, and set these things as priorities so that you won’t ever be caught in a position that will leave you in financial trouble.
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