Are you currently living your life today or surviving? You see, living is far from surviving by definition. You will learn How to create a budget plan that works.
If you’re able to spend without hesitating about whether or not you still have left to cover next week’s expenses, you’re living. If you find yourself on the edge and hardly keeping ends meet, you’re surviving.
If you find yourself on the surviving spectrum or somewhere in between, setting up a budget and monitoring your finances is a solution to pull your way up to living your life in its full potential. Yes, it can be time-consuming, restrictive and difficult in general but it’s a surefire way to pick yourself up, get yourself out from debt and control your budget.
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You’re only a few steps to reaching your financial goal. Don’t let the red “sale” posters, luxury and leisure temptations hold you back. With a concrete budget and spending system, you get to splurge (occasionally and wisely) and tell your money where they should go! Here are ways on how to make a budget plan that works for you.
Where does your money go? Do you know how much accumulated spending goes to your daily coffee? Do you have an idea how much you spend on your daily lunch and snacks?
Ideally, your budget should have more or less the same categories monthly. How do you determine those categories? Check out your bills, credit card statements, and other expenses for the past three months. This gives you an overview of your likely regular expenses. If there’s something you think should get crossed out or added, do so.
There should be three primary categories in your budget system:
- You’d need to know how much money comes and all your sources of income (considering some juggles two or more jobs; earns extra on the side) to determine how to properly distribute it and prioritize it. This should be a no-brainier.
Your regular expenses are exactly what you think it is—rent, mortgage, utility bills, groceries, car payments, debt payments, and the like.
Transportation and food allowance can also go under here if you don’t own a private vehicle and don’t have time to prepare a packed lunch and snacks to work. Savings, retirement and emergency fund can also be under this category.
Under here falls your entertainment, shopping, work expenses, vacation expenses, and the like. You’d be surprised how much your money goes to these spendings.
In simple terms, regular expenses are your needs while irregular expenses are your wants. Do you really need to buy a new dress or comic book monthly? Those can fall under your wants. By now you should know your priorities, and that’s your regular expenses or the needs.
Planning your Budget
Now, this is the part where we get into business. Budgeting is serious business, and this is where you shape your budget to your own convenience and in your own terms. Not all budget plans work for everyone, so it’s only ideal to make one that suits for you. The best and most popular budgeting method you should try would be:
50-30-20 rule. Have you heard of this minimalist budgeting rule? If not, it essentially breaks down your spending into three categories, and in percentages according to your income:
50% on your income goes to the regular expenses. 30% goes to your wants and other unnecessary expenses such as your phone bill, gym expenses, and the like. The rest of the 20% should be allotted for your savings and other funds you have set up.
If in case the method don’t suit you, make your own percentage method that fits your lifestyle and budget. In addition, set up a goal (i.e. weekly, monthly). It could be saving *amount* monthly, increasing your savings, adjusting your transportation expenses to compensate with your unexpected expenses fund, and the works.
Track your Expenses
This is the most important step in budgeting and it’s critical to keep tab on tracking your expenses to truly stick with it and avoid unnecessary spendings. If you’re having difficulties keeping track of it, find a method or tool that works for you.
If you think online services or apps doesn’t work for you and you’ve tried hard but just couldn’t find the best software for you, you can work the old way—using pen and paper. Many people still prefer using this method, it all depends on what’s most convenient to you.
If you’re tech savvy and you’re clinged to your smartphone most of the time, you may find apps and other online softwares work for you.
It’s essential to find and use a tool that works for you. If it’s utilizing envelopes, spreadsheet tracking, and others, go ahead. You’ll have to test a few tools and if you get your grip on something that works for you, stick with it.
As much as you can and whenever you can, always use cash. Credit cards is seen as an unlimited source of money (that you can and should pay for later) which encourages people to spend more than they need and have.
With cash at hand, you’ll think twice before you spend a dollar. It makes you do a double take whether or not an item is worth your money, does it have a job or not. Every dime your spent should have a purpose.
Have you started a budget plan already? How’s it going so far? Leave your tips and advices on the comments below. If you’re just starting, let us know what works for you, share it with us!
About Chie Suarez
Chie Suarez has spent time figuring out ways on saving money and stepping away from her go-to retail stores. She then became a writer for Speedy Money which offers hassle-free payday loans services.