How To Begin Budgeting (For Beginners)
Six Steps To Easy Budgeting
No matter if you’re starting in a new job (again) or simply curious about how much you can save for your future, budgeting is the most effective way to manage your money. By building a budget you open potential to create financial goals which you can work towards. Budgeting requires constant evaluation and updating and this is one reason why people may be turned off from starting a personal budget. However, with a little hard work, you can develop a picture of where your money goes and what is possible in terms of long-term savings. Budgeting is useful for setting large purchase goals, planning ahead (setting life goals) and providing fiscal security for you and your family.
There is no one correct way to format a budget. However, all budgets should include the same basic outlines of income and expenses. We have put together the following six step guide to budgeting, beginning with income and expense assessment, to help first-time budgeters get a grip on their finances. By calculating your credits and expenses you can work out how much you are saving and how much you are spending. The rest of the guide is necessary to begin thinking forward rather than in the moment in terms of finances.
An income assessment involves calculating the sum of all your expenses in a given time. Your bank will provide a summary of your expenses on their app or website, you just need to log in.
An expense assessment involves calculating the sum of all your credits in the same given time. Like expenses, your bank can provide you with a summary of your credits.
After calculating spending and increments to your wealth, it is very simple to get a rough picture of what you are saving over time. With this information you can set goals and create a plan to reach them.
At this point, goals may involve saving the same amount every month in the lead up to a major purchase. Goals could also involve cutting back on expenses to save more in future months. In either case, matching your goals with a plan to reach them strengthens the likelihood you’ll be able to achieve them.
Create A Plan
To cut down on certain expenses (for example, hobbies, alcohol or eating out) in order to increase your savings, you may need to adjust your expense assessment to include categorisation of your spending. By segmenting your expenditure into ‘coffee’, ‘alcohol’, ‘eating out’, ‘utilities’, ‘rent’, etc, you can work out where you may need to trim the fat in order to reach your financial goals quicker.
Develop Your Income Bucket
If you have calculated your saving and spending, worked out what you want to buy and how much you need to save each month to buy it, you give yourself the chance to evaluate income streams and set future life goals. If you need to earn a certain amount in order to buy something you want then you can take steps towards growing your income bucket like taking extra classes or applying for a promotion.
Over time, you will begin to realise whether you are on track or otherwise to meeting your goals. If you want to improve further or are struggling to meet your own expectations then it can pay to employ the help of a Financial Services Company like Pillar Financial. We can help you manage and grow your money. We have over ten years of experience helping our clients to improve their financial outlook or prepare for retirement.