How to Budget Like a Pro
Sticking to a budget plan is one of the key elements to financial success.
They help to keep you on track, minimalize unnecessary spending and save for the more important aspects in life such as buying real estate, saving for retirement, or creating a college fund for your future children. However, creating that budget is often a difficult task for many. Below are five steps that can help overcome that difficulty and get you started to becoming a budgeting guru.
Step 1 – Track Your Spending
Before sitting down to create your budget, you’ll need to track how you spend. Simply write down every purchase you make within a month – from utilities to gas to renting a movie, everything. In doing so, you’ll be able to see what you’re spending and how.
Step 2 – Understand Your Goals
Now that you recognize your spending habits, it’s time to establish your goals. Everyone will have different goals with their budgeting. Some may want to save for their first home while others may want to budget to allot for a comfortable retirement. Each goal will have its own financial requirements and once you understand the goals of your budget, it will be easier to understand the amount allotted for each item in your budget.
Step 3 – Determine Your Necessities
Although you have your goals established, don’t rush into allotting a large amount to that goal. Instead, you need to first focus your budget on the necessities – rent, utilities, food, gas, and so forth. Sit down and really focus on figuring out how much to allot for your necessities (this is where your tracking comes into play).
Step 4 – Spend Within Your Means
Just because the remainder of your budget doesn’t cover necessities, doesn’t mean you’re free to use it however you please. This is where your budgeting skills really come in to play. Analyze how you spend and see if your miscellaneous purchases are more elaborate than what your income allows.
One common example is how people will spend around $10 on lunch every day at work. Yes, you receive the satisfaction of a good meal and not having to prepare a lunch, however, wouldn’t it be even more satisfactory to save up to $50 a week and put that towards your big financial goal(s)? It’s easy to get into a routine that allows for immediate satisfaction, but in reality, it sacrifices the long-term satisfaction of financial success.
Step 5 – Set Up Automatic Savings
Once you have thoroughly analyzed your spending, you’re beginning to realize how much you should allot for what. To keep on track with your budget plan, make automatic savings to achieve your goals you established in step two. Once you get in this habit, you’ll begin to see it as investment money and not spending money.
Overall, creating a budget plan isn’t a one-size-fits-all scenario and the most difficult aspect is getting started. Though there are many additional ways to establish a stellar budget plan, these five steps are an excellent way for you to start becoming the budget pro we all aspire to be!