So you’re looking for a way to be better with money? Then you’ve come to the right place. Budgeting can be daunting, especially when you don’t know where to begin. You may have thought about it before, but your financial difficulties have overwhelmed you.
Don’t worry; budgeting is a lot easier than it looks. It takes some time to figure things out. But once you have everything under control, you’ll feel the impact of your new financial literacy on your life. Let’s look at how to set up a budget that works for you.
Figure Out Your Net Income
The first part of budgeting starts with knowing your net income, the money you make after taxes, and other deductions. If you focus on that, you’ll likely overspend because you think you have the money. For those of you that have side gigs—like freelancing—subtract anything that reduces your overall pay.
Net income can be tricky at times because there may be an odd month where you get a random monetary gift or cashback reward. For example, let’s say you have Cash App. There are plenty of scams out there claiming you can get free money.
If you want to know how to get free money on Cash App, you’ll need to link your account with a Yotta debit card. It’s the only legit method. By purchasing different items, you can get cashback rewards, which you can include in your net income. However, if it’s not something you rely on monthly, there’s no need to add it to incoming funds.
Review Your Spending Habits
Once you figure out your net income, next is figuring out where it’s going. Tracking and categorizing your spending is a simple way to see what you’re buying and how you can save in certain areas. For example, you already know that you have bills that need to be taken care of, so you can list the amount of those fixed expenses.
On the other hand, you have variable costs, such as groceries, gas, and social activities, that may be the most significant areas where you can save. Review your bank statements to get a better idea of your spending habits. You should also review your daily purchases for more financial insight since these purchases can also add up.
Set Realistic Financial Goals
After figuring out your spending habits, the job isn’t finished. Next, you’ll need to create short and long-term financial goals catered to your needs. You should aim to complete your short-term goals in around one to three years; long-term goals—like retirement planning—may take longer to reach.
However, when creating these goals, it’s essential to be realistic, or else things could get overwhelming. They don’t have to be set in stone, but identifying them can help you stay the course when trying to stick to a budget. For example, if you’re saving for a new car, you’ll cut out certain social activities to get the extra money.
Create Your Plan
Now, it’s time to create your budgeting plan. You know your fixed and variable expenses, net income, and priorities for the upcoming months. Categorize what you need to do and set realistic spending limits for each. So if that’s $50 for groceries or $70 for entertainment—do what you need to while ensuring you stay within the budget parameters.
You could also break down the categories into things you need vs. what you want. For example, gas in your car is a need, but buying a new pair of $200 shoes that recently came out is a want. It clearly defines what’s important when looking for ways to be better with money.
Adjust Your Spending
As you follow your budget, you can adjust your spending accordingly to have money to put toward your financial goals. One way to modify your spending is by looking at your “wants.” How much money have you spent on things that you wanted? Yes, you’ve allocated a particular portion of your income for that purpose. But you may have to make further cuts if you want to reach specific goals.
You could also take a look at other areas of your fixed expenses. Maybe you could cut back on an insurance policy? Before making a big decision, weigh the pros and cons, so you don’t suffer a financial setback.
Budgets Help With Financial Literacy
Once you create a budget, keeping your finances on track will be easier. But ensure you review it regularly because things can change. You could get a raise, have new expenses, or have a new goal. Whatever it is, make sure you adjust your budget accordingly to stay on task.