Keeping up with finances can be tricky, especially when it comes to sticking to a budget. Sometimes, we want to set a budget for ourselves to keep us from overspending. Sometimes, it’s because we want to save for an investment in the future. And often, it’s simply because not sticking to a budget can lead us into financial difficulty.
Whatever the reason, the benefits of having a budget shouldn’t be underestimated, and there are many tips that can help you along the way to setting one up. In this article, we will outline how to set up your own personal budget and give you a few pointers on how to maintain it.
Why create a budget in the first place?
Creating a personal budget is beneficial for a number of reasons:
- It helps create a spending plan
- It ensures that you always have money for what is important to you
- It helps you work your way out of debt and avoid getting into it in the first place
How to set up a personal budget
So, you want to set up a budget for yourself. But how do you go about doing that? Here are some crucial first steps:
- Identify your income and work out your recurring expenses — these are key. While setting up a budget is extremely useful, you don’t want to make it unrealistic for yourself. Having your recurring expenses set out helps you set a budget that makes it possible for you to pay your bills and still have peace of mind. This includes taxes, rent, utilities, etc.
- Track your spending: get in the habit of writing down what you spend money on. It can also be useful to make a note of any extra money that you have coming in.
- Set goals for yourself: long-term goals can take a while to achieve, but they help keep you motivated and give you something to work towards.
Different ways of tracking your budget
Some people like to track their money on paper. Others prefer digital alternatives. Whichever method you choose, it’s a good idea to have your budget and spending written down somewhere. This is crucial for keeping on top of things.
Re-evaluate your current spending
Setting up a budget can help you reassess your current spending habits. Maybe you notice that you eat out a lot more than you thought you did, or maybe you notice some old subscriptions that you don’t really use anymore but are still paying for. By keeping a budget, you can more easily identify and eliminate these sources of extra, unnecessary spending, which can save you a lot of money in the long run.
Be patient
It usually takes a bit of trial and error to get a good rhythm going. You won’t know right away what the best budget is for you, but don’t let this discourage you. It may take one or two months, but after that you will have found your footing and worked out the kind of budgeting system that works best for you.
Be open to fluctuation
Not every month will be the same. Sometimes extra, unexpected costs can come up — but don’t beat yourself up if this happens. Here are a few reasons why:
- This is normal — it happens to everyone and it does not mean that your budgeting is not working.
- You’ll be able to thank yourself if you set aside a portion of your income every month for potential emergencies as part of your budget.
- Remain open to reworking your budget for the following month if something pushed you over your current one. This will help you stay balanced and acknowledge your hard work and progress.
Easier management of your money
Staying on a budget makes it easier to manage your finances, track your spending habits, build up your savings and helps you keep a better handle on your money overall, all of which contribute not only to your financial health, but your physical and mental health as well.
Tips for helping you stay on budget
- When it comes to food, try to eat at home rather than eating out.
- Learn how to make your favorite coffee at home and take it with you on your way to work, rather than buying it from a coffee shop every morning.
- Make grocery lists based on weekly meal plans — this will help you avoid spending too much on food that then goes to waste.
- Take food to work rather than going out to eat every lunch break.
Avoid buying new clothes when it’s not necessary. Not only is fast fashion damaging to the environment, but it is also easy to get carried away with affordable prices and recurring sales. As a result, we often end up spending a lot more on fashion items than we realize. Changing your mindset and adopting a more minimalist wardrobe can help you make less unnecessary purchases.
It can sometimes be difficult to limit impulse-buying. Instead, try a new strategy that helps you make more mindful purchase decisions. This can be done by rethinking whether or not you really need something, as well as avoiding visiting malls and shopping centers without a purpose. More information on mindful consumption can be found here.
You can also consider biking, carpooling, using public transport, or even walking whenever possible. In short, it is useful for your budget to limit how much you use your car (if you have one). It’s not just helpful for the planet; it also saves you quite a bit of money on gas and repairs.
Finally, focus on adopting a healthier lifestyle. Although this is something that takes more time than the previous tips, by eating better and exercising regularly, you can reduce your chances of getting sick, which means less money spent on doctor’s visits, medications, treatments, and surgeries; in short, a healthier (and wealthier) you.
Review your progress
Every now and then, take a moment to review your progress. Most of the time, we don’t even realize how much progress or change we’ve really made until we look back on where we started. Reviewing your progress will also help you decide if you’re where you’d like to be financially or if there are still some areas you’d like to improve. It’s a good habit to look back at your progress every 3 months or so.
With these tips in mind, you can better manage your finances, achieve financial health, and ultimately obtain financial security.