3 Steps To Build Your Own Budget
For most people, creating a budget is seen as an overwhelming, stressful task to do. But having a budget is a crucial part of managing one’s money and taking control of your finances for your future. Rather than thinking of it as a limiting list of things that are restricted to you, think of it as a way for you to have an organised and happy life.
In this article, we’ll talk to you about how you can build a budget and the steps you need to take when getting started.
But before anything else..
What is a Budget?
A budget is a way for you to keep track of the money you have incoming and the money you are planning to spend in the future. You can think of it as a personal financial situation sort of map. Every person has a unique way of budgeting as there is no one-size-fits-all approach to this. With that said, there are still some steps you can take to create an ideal personal budget planner.
Having a budget plan doesn’t only mean that you need to keep track of how you spend. The budget that you want should also outline the personal financial goals as well as the steps needed to achieve them.
Why Do I Need a Budget?
Having a budget is crucial in taking control of your finances. It’s an excellent first step, especially when you plan to manage your money better as it shows you how much you earn, what you plan to spend and what you’re currently spending on.
A good budget can provide you with insights on how you spend your money and find areas where you might be overspending. It can also show you aspects where you could spend more. This lets you identify the things you can prioritise, such as the essential and lifestyle expenses.
Basically, having a budget will help remind you of the necessary things you need to spend money on and those that are simply indulgences.
Steps in Creating a Budget
Below are the three simple steps you need to take to start making a budget.
1. Calculate How Much You Earn
There are many sources where income can come in. This can be in the form of your standard pay and other side money you can get, such as government assistance. You should also include your earnings from investments and savings.
In order to have a clear financial picture, you need to make sure that you take into account each income source – whether that’s your regular salary or even temporary income.
2. Go Through Your Expenses
It can be quite a revelation to truly know where your money is actually heading, even if it’s not really easy to know all of this. You can begin by reviewing your credit card statements, receipts, bills and bank info to know what you’re currently spending money on and how much.
Your list of expenses should include:
- Home loan or rent payments
- Grocery and lunch or dinner expenses
- Utility bills like electricity, gas and Internet
- Transportation costs such as petrol, public transport and tolls
- Medical bills like regular medications and health insurance
- Gym memberships
- Education expenses
You should also keep in mind the expenses you might need to pay every quarter or year, such as your car registration, home insurance, property taxes and the like.
3. Prepare Your Budget
Using an online budgeting tool, you can easily create a budget and have a deeper understanding of where you sit financially at this time. Adding up all of your income and expenses, including how frequently you earn or incur the costs can give you a view of the money going in and out every fortnight, on a monthly basis or even each year.
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