Embracing financial wisdom and being open to the process of learning how to handle your money well is a smart formula if you want to achieve financial freedom.
There are many tips you need to follow and one of them is budgeting.
Working with a budget has many benefits and it’s not just a tool for people who are struggling with spending discipline or limited funds.
So long as you have a source of income, you need to plan for it and this is where a budget comes in. It can help you pay off debt within a shorter time and also put you on the right track for a bright financial future.
If you’re a novice at this do not worry. It may be confusing at first but with some of these amazing tips you will be able to ace it:Get a notebook
With budgeting, it’s always better to go old school by writing it all down. It’s harder for you to get a clearer picture if you assume what your situation is or use some of the confusing budgeting apps around.
Buy a notebook that you can specially use as your budgeting book and spare some time where you can actually sit down and write your budget down. This book will also help you easily track your progress at the end of the year.Check how much you bring in monthly
Everyone has different ways of budgeting depending on what works for them. Some people prefer doing weekly budgets, others bi-weekly budgets but a simple place to start as a beginner is a monthly budget.
- Why you need to make financial freedom your goal
- Black tax: Just exactly where do you draw the line?
- Are you struggling to set aside money every month?
- How you can get out of a financial hardship
Write down how much you bring in monthly after all the deductions have been made and if you have multiple streams of income, add it all together to get the total income.Categorize expenses
Getting this step right is crucial because it will help you to accurately organize your priorities.
You need to start with the most important from loan payments and fixed expenses like rent, water bills and insurance payments. Also, include other future plans you have coming up whether it’s saving for a home or a wedding.
Once you are done with that, you can add the extras like eating out at restaurants and shopping.Leave room for miscellaneous expenses
Budgets are only meant to give you a rough estimation of what is happening with your money. You might find that you need to pay some extra cash in one area and that is why it’s always important to create a category for anything that might come up or in case you spend more than you had anticipated.
This also helps if you have any off-guard situations like buying a gift that you forgot you needed to so at least you will have already planned for it in a way.Make adjustments where necessary
In this step, you now need to add everything up subtract your expenses from the income to see whether you are on track.
If you see that your expenses are more than your income, you need to make some changes and maybe reduce some of the extras for now.
If you have some extra cash remaining after you have added up all your expenses, it’s better to allocate it somewhere like adding it to your savings or investments instead of spending it on unnecessary things.