Are you a beginner and learning about budgeting? Maybe you are in the college and struggling to save money. Maybe you have just started your career and want to learn to budget to achieve your financial goals. Whatever it is, for many of us, financial planning can seem complicated and daunting. You need not to be worried. You can always learn and implement.
In this blog post, we will be giving an overview of budgeting and saving tips designed with beginners in mind.
Let us first understand
What is a budget and why is it important?
A budget is a financial plan that outlines your income and expenses over a specified period. It helps you determine how much money you have available to spend, save and invest.
Now, why is it important?
It is important because it helps you take control of your finances and ensures that you are living within your means. It helps you identify areas where you can cut back on spending and prioritise your expenses. Overall, it can help you reach your financial goals, avoid debt and lead a stress-free financial life.
How to budget and Save money for beginners?
If you are new to budgeting, you may experience initial troubles, but with a little time and effort, you can easily create a budget that works for you and helps you save money.
Determine your monthly income
The first step in creating a budget is to determine your monthly income. The most accurate method is to take your annual salary and divide it by 12. If you want a more precise number, you can use your last pay stub from work. This will show you exactly how much money you brought in last month, and you can use that number as an estimate for this month’s income.
Once you have your net monthly income figured out, you can start to create a budget. Your monthly income includes your salary, any freelance work, or any other sources of income. Ensure you include all sources of income in your budget.
List all your monthly expenses
Once you have your monthly income, list all your monthly expenses. This can include things like rent/mortgage, utilities, transportation costs, food, clothing, entertainment, debts/loans, etc.
Once you have your list, add up all the expenses to get a total monthly amount. Now that you know where your money is going each month, you can start budget accordingly. Ensure to leave some room in your budget for unexpected expenses, too.
To make the process easier, you can also use a budgeting app or a spreadsheet.
Compare your income and find areas to cut back on expenses
Once you have a complete list of your expenses, now compare your monthly income with your expenses and see if you are spending more than what you are earning. Start evaluating your necessary expenses and discretionary expenses, like entertainment, shopping, and travel.
Find areas where you can cut back to free up more money for savings. Start prioritise your expenses.
For example, if you are eating out frequently, try cooking more meals at home. Or if you have a high car payment, see if you can trade in your car for a cheaper model.
Once you figure out where to cut back on your expenses, you can certainly stop overspending.
Have saving goals
It is important to have savings goals in mind when you’re budgeting – otherwise you may end up spending money unnecessarily. Think about what you want to save for and how much you will need to put away each month to reach your goal.
Perhaps you’re saving for an emergency fund, a holiday or a new car. Whatever it is, ensure your savings goal is realistic and achievable.
Allocate a portion of your income towards these saving goals each month. Now that you have a specific financial goal in mind, develop a plan for achieving your goal. This may include cutting back on discretionary spending, automating your savings deposits, or looking for ways to earn additional income.
Tracking Your Spending Often
Tracking your spending is one of the most important things you can do to stay on top of your finances. By keeping track of where your money goes, you can make sure that you are spending within your means and not overspending.
You can use any budgeting method to track your spending. You can either use a budget app or a simple journal and log all your expenses. Over the time, you will see changes it has brought into your financial track.
Adjust your budget as needed
Over time, your expenses may change, your budget never stays the same. As you grow, you will have your family and your needs will grow too. As your income and spending pattern will change, you may need to adjust your budget accordingly.
Thus, it is important to regularly update and review your budget and make adjustments to them as needed.
For example, if you get a raise in your salary, your spending pattern may change or you may want to consider investing more or use the increased amount in your debt repayment. Whichever case is this, make changes in your budget so that you can get a clear picture of your finances.
Stick to your budget
As a beginner, it gets tough to stick to your budget all the time. But it is important, as it will help you keep track of your spending and ensure that you are not overspending.
Have a realistic budget as if you try to cut too many corners, you will probably find yourself unhappy and stressed out. If there is something that you really want to do but it is outside of your budget, look for cheaper alternatives or ways to save up for it.
Sticking to a budget as a beginner is certainly difficult, but it is achievable with some planning and discipline.
Keeping a budget is tough. The temptation to buy things that are not accounted for can be exhausting, especially as a beginner.
Budgeting and saving money is an ongoing process that doesn’t have to be overly complicated. With a plan in place and realistic goals, you can start building up your savings account little by little.