deepstash

Beta

5 Simple Steps to Creating a Budget That Actually Works

Budgeting = creating a plan to spend your money

Budgeting is simply balancing your expenses with your income.

It's a plan for the coordination of resources and expenditures. When you budget your money, there’s a desired outcome. And being able to track your spending should ultimately move you in the right direction towards meeting your financial goals.

804 SAVES


This is a professional note extracted from an online article.

Read more efficiently

Save what inspires you

Remember anything

IDEA EXTRACTED FROM:

5 Simple Steps to Creating a Budget That Actually Works

5 Simple Steps to Creating a Budget That Actually Works

https://www.crediful.com/creating-a-budget/

crediful.com

7

Key Ideas

Budgeting = creating a plan to spend your money

Budgeting is simply balancing your expenses with your income.

It's a plan for the coordination of resources and expenditures. When you budget your money, there’s a desired outcome. And being able to track your spending should ultimately move you in the right direction towards meeting your financial goals.

How to create a budget

  1. Gather Some Financial Information: gather a detailed list of your income and expenses.
  2. Select a Budgeting Method: figure out how you’ll budget your money to meet your most pressing financial goals.
  3. Create Your Budget: tally up all your expenses and income to see where you stand and allocate expenses.
  4. Execute Your Plan: you can use a notebook, pen and paper, a spreadsheet or an online software.
  5. Reward Yourself: you can work a small percentage into your budget to treat yourself each month.

The 70:20:10 budgeting method

This method suggests that you allocate 70 percent of your income to expenses, 20 percent to savings, and the remaining 10 percent to debt.

70:20:10 may work for someone with a healthy emergency fund and minimal debt.

The 50:30:20 budgeting method

Under this method, 50 percent goes to expenses, 30 percent goes to wants, and 20 percent goes to a combination of debt and savings.

A person with a healthy amount of disposable income but loads of debt could probably benefit more from the 50:30:20 method.

Allocating expenses

The most common buckets are:

  • Expenses, or your needs: housing, food, transportation, clothing, insurance, childcare,  etc.
  • Debt - monthly debt obligations: personal loan, student loan, auto loan, and credit card payments etc.
  • Savings, including funds for your emergency fund.
  • Consider automating your retirement contributions to ensure you stick to the plan.
  • Wants: don't deprive yourself.

Online Scheduling and Online Bill Payment

Scheduling your payments  (online or through your financial institution’s bill pay feature) decreases the likelihood of blowing your budget. 

Despite the fact that funds will be sitting into your account until the date they are due to be withdrawn, you’ll know the money is off limits for casual spending.

Benefits of automated savings

  • you don’t have to go through the trouble of making an additional transfer
  • it won’t be as tempting to spend money that’s sitting in a savings account that you don’t make regular transactions out of.

EXPLORE MORE AROUND THESE TOPICS:

SIMILAR ARTICLES & IDEAS:

A Monthly Budget For Your Money

No matter how little or how much money you earn, creating a monthly budget is one of the most important aspects of managing your finances. What gets measured gets managed.

...

The Envelope System

The Envelope system is a way to track your variable expenses like food, entertainment, and drinks.

This method, preferably used weekly, allocates a certain amount in each category in labeled envelopes (food, drinks, movies, etc.). Once the envelope is empty, you are done spending in that category.

How to Create a Good Budget

The principles that make a good budget, something you can stick to:

  • Being Realistic: Being too strict is a recipe for failure.
  • Making Adjustments: A budget is not set in stone, but a fluid thing.
  • A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.
  • Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.
  • Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.

2 more ideas

The zero-sum budget

Using this method forces you to “spend” every dollar that you make, by allocating all of your earnings into the different categories that your finances require.

It prevents waste and m...

Steps of the zero-sum budget
  1. Determine how much you make on any given month.
  2. List your bills: Once you determine how much money you'll make this month,  figure out how much money you need to spend next month.
  3. Compare and contrast:  Once you see your monthly income and your monthly bills on paper, a clear picture of how much money is left over emerges.
  4. Spend all of your money on paper: decide where that money will serve you best.
  5. Track your spending.
  6.  Make adjustments to get it right.
The 50/20/30 budgeting method
The 50/20/30 budgeting method

With the 50/20/30 budgeting method:

  • 50% of your monthly spending goes toward essentials - your home, your food, etc.
  • 20% of your monthly spending ...
Debt payments

Debt payments may look confusing when you add it to the savings column. But the easiest way to build up a savings balance is not to have your money go toward debt. Once your debt is paid off, you can increase the savings.

Reducing your essentials

Play around with your monthly budget to see where you can reduce your monthly spending:

  • You could contact your internet company to get a discount.
  • You can clip coupons and use rebate apps to spend less on your monthly groceries.
  • You could set aside less for medical expenses if you have an emergency fund.