No matter how big your income is, budgeting is the key to a stable financial situation. Why income doesn’t matter you may ask?
Well, if you cannot budget when you have $1,000 how will you budget when you have $10,000?
Budgeting is a habit, or rather a lifestyle that you have to get used to and keep applying.
Below are five simple budgeting tips to get you started!
Make a full review of your income and costs
Take a while to consider all the bills and monthly outflows that you have to cover. Put them in a clear list, so you see the total outflow.
Do the same with your income. If you have one job, that is quite easy. If you are working several part times jobs – put the number together.
Particularly, in the case of costs this a crucial point. You have to get things under control, and the only way to get them under control is to have a clear view on what your costs really are.
Needs and wants
You have to strictly differentiate between what you really need and what you just want. Needs are the things that you really need in life. You need to pay bills, you need to buy groceries and so on.
Wants are not necessities. Those are the things that you can go without, but in this moment you feel like you need them. In most cases, you do not.
If there is a bigger “want” that you are going for, give it a few days. In most cases, your desire to get the item will pass.
Push your costs down
Seems obvious right. You would be surprised. How long has it been since you revised your mobile plan? What about cable TV? Maybe you could switch to Netflix, it’s cheaper.
If you will go into details, there are many areas of your spending where you can push the costs down. Do it and keep it that way. Pushing down the costs is much easier than making more money.
Do it every quarter. You have to constantly keep revising it, or else it will grow over you again.
It is not enough just to sit down one evening, make some financial planning and then forget about it. You have to stick to it. Consistency is the key here.
Check your budget every week, see if your spending is in compliance with the budget. The fact that there is a number written down and you have a plan will help you immensely when taking control over your spending.
Make projections and save historical results
Save your spending history. Monitor your monthly balance and write it down in a spreadsheet. Time flies by very quickly and just by looking back you will know if you did well this quarter or not.
You cannot improve what you do not measure. If you will monitor your balance and spending month to month, you will notice the trajectory you are on.
It will be much easier to improve when you can compare the numbers.
Combining these 5 simple budgeting tips will help you to get started with your personal financial plan.
Over time you will be improving your plan and budget. Most importantly – stay consistent and keep the record of your budgeting history. You cannot improve what you cannot measure.
If you are still on the ropes on how to start, just make a simple spreadsheet in google sheets. Take it step by step from there. Don’t overdo it with some fancy templates or tables. The main goal here is not to create a complex system. The goal is to make sure that you know where your money is going!
About the Author
Peter Rolins is a fan of frugal living. Finding comfort in savings and investing, he gladly shares his experience through writing.