How to make a budget in 4 steps

Budget

 

Whether you’re preparing to move, help your family, or buy a home, saving money is very important. You probably know that you should have a budget, but you may not know how to do it.

How to make a budget in 4 steps: your guide.

Why make a budget?
If making a monthly budget isn’t fun for you, you’re not alone. In the United States, about six in ten people don’t keep a monthly budget, according to a survey by the National Foundation for Credit Counselling .

Budget Definition: Corporate &Amp; Personal Budgets

There are many reasons to create a budget, such as:

pay for college
make large purchases
Send money to your loved ones
Save money for an emergency
Having a budget can be one of your most valuable tools to make your money go further. It is the key to being smart and efficient with your money.
Why a household budget will help you in the long run
A budget is the most basic financial planning tool there is. And while it can take time to understand how to create a budget that works for you, it can provide you with a solid foundation for financial success and stability.

When you have big plans that require money, a well-done budget can help. Here’s why:


It allows you to understand where your money is going each month.
You have more control over how you spend your money, instead of leaving it to chance and impulse.
It can help you set goals, track your progress, and see results.
You’ll learn to live within your means as you work toward the financial goals that are important to you.
It allows you to align your spending habits with your priorities.
That all sounds great, but getting started isn’t always easy.
How to make a budget in four steps
To start, subtract your expenses from your income and make sure the difference is not negative. You can create a budget in four easy steps:

How To Make A Budget: Step-By-Step Guide To Managing Your Money

1. Determine your income
This step will be easy if your income doesn’t fluctuate every month. However, if you are self-employed or your hours may vary, take the average of the last three to six months to get an idea of ​​what you can expect to earn in the future.

2. Calculate your monthly expenses
Take a look at your expenses from the last month and assign them different categories. Use as many categories as possible to give you an idea of ​​how you spend your money. You can always consolidate others later to keep things simple. Categories can be things like rent, groceries, medical expenses, and more. You can find some recommended budget categories here.

Also, be sure to add in any recurring expenses that don’t happen every month , like an annual membership or semi-annual insurance premiums. Divide those expenses, so you know how much they cost you each month.

Finally, include your monthly savings goals and extra debt payments, if applicable.


3. Create your first monthly budget
Add up all your expenses from the last month and subtract them from your monthly income. You can do this on paper, with a budget sheet, or an online budget calculator . Congratulations! You have created your first monthly budget.

Why Do We Need A Budget?

If the difference is negative, you’ll need to adjust a few things to make sure you’re living within your means.

But if you still have some money left over, you can choose what you spend it on. Before you decide to spend it, consider putting it toward savings or paying down debt.

4. Keep track of your expenses
Creating a budget will do you no good if you don’t follow it. As you go through the month, take time at least once a week to add up your expenses and make sure you’re on track with your budget.

As you calculate your budget, consider whether you need to make adjustments. If it’s the middle of the month, for example, and you’ve already spent $300 of your $400 food budget, your budget was too conservative or you’re overspending.


Also See;

The Best Banks for Non Residents In The US

10 UK Universities that Accepts International Students

5 Common Reasons for Refusal of A Students Visa

How To Open a Bank Account in the United States 


Be honest with yourself about what it is, and then adjust to make sure you don’t go over your overall budget for the month. That may mean taking money from another category or reducing your savings or extra debt payments for the month.

Four Useful Methods for Creating a Budget
Creating a budget for yourself can be daunting, but the last thing you want is to start one and then stop after a few months. The key to creating a budget you stick with is finding what works best for you.

There are several different budgeting methods. While some require a lot of planning and tracking, others focus more on overall spending trends and don’t take up as much time.

As you consider each family budgeting method, consider your preferences and choose the one that best helps you achieve your goals without overcomplicating your life.

zero-based budgeting
With this method, the goal is for your monthly expenses to be exactly equal to your monthly income. In other words, you are deciding exactly how every dollar you earn is spent.


To optimize a zero-based budget , it’s best to include your monthly savings and debt goals. This approach is great for people who want to develop discipline with their spending and like the idea of ​​knowing exactly where their money is going.

However, if you end up overspending in one area, there is no buffer. This means that you will have to take money from another expense category to offset it. It’s also a good idea to keep an extra few hundred dollars in your checking account in case you go over budget and can’t make it up.

Envelope System Budget
This method, popularized by Dave Ramsey , favours the use of cash instead of a debit or credit card for all your expenses. Using this approach, you’ll determine how much you’re going to spend in each category, such as groceries, rent, utilities, and more.

Next, you will go to the bank and withdraw enough cash to cover all your expenses for the month (you can also do it every week or fortnight) and divide it among the designated envelopes for each category.

As in the zero budget, the idea is to stay within the limit that was budgeted for a single category. If you run out of money from one pack, you take some from another pack instead of going to the bank to get more.


Because there are so many factors to take into account with this method, it’s not the best option for people who don’t want to deal with that kind of complicated setup. It’s also not a good option for people who prefer to earn rewards using their credit cards.

But if you like the idea of ​​using cash and want to develop the discipline to use this method, it’s worth considering.

Budget 50/30/20
The 50/30/20 method assigns all of your spending to one of three categories: needs, wants, and financial goals. The idea is that 50% of your monthly expenses should go towards your basic needs, 30% towards your lifestyle, and 20% towards saving and paying down debt.

The approach is much simpler than zero-based budgeting, and could be a good option for someone who wants to budget but doesn’t want to feel too constrained.

However, avoid taking the 50/30/20 ratios at face value. If you have a large student loan or other debt payments or have big savings goals, it may be worth using 50/20/30 or 50/15/35 as your ratios. The good thing is that you can choose.


Pay yourself first method
The “ pay yourself first ” method, is the simplest of all. The idea is to add up necessary expenses, such as rent, utilities, and debt payments, and add additional savings and debt payments.

Once you set aside your expenses, you can do whatever you want with the remaining portion. There is no need to keep track of your regular expenses; you just have to make sure you don’t overdraw your checking account. One way to avoid this is to take some of the remaining portion out of the bank as cash, and only use it for your extra expenses.

It’s always a good idea to “pay yourself,” but this approach makes it a priority. It’s a good option for people who struggle to save each month but don’t want a complex program.

Tips to stay focused
If you’re afraid you won’t be able to stick to a budget or feel like it’s going to be too much work, here are some tools and tips to help boost your confidence.

Forget pencil and paper
Even if you’re old school and prefer to use pen and paper, writing your budget and tracking your expenses by hand can be time consuming.


At a minimum, consider using a spread sheet as a monthly budget tracking tool. If you’re not a spread sheet expert, try a monthly budget template to help you with formulas and calculations.

Use a budget app
Budgeting apps like Mint , You Need a Budget , and Pocket Guard are designed to do a lot of the work for you. For example, some allow you to connect all your bank and credit card accounts, and will import your transactions into one place. In this way, you do not have to enter each of your accounts to control your expenses.

They can also provide you with a basic household budget template that you can customize based on your particular financial situation.

While some budget apps are free, others charge for their service. Make sure you pick the one that best suits your needs and wallet, but also keep in mind that spending a few dollars a month on an app that can help you save hundreds of dollars a month is usually worth it.

Remember the “why”
Budgeting is rarely fun. But if you have financial goals you’re working toward, a budget can help you reach them.

It’s important to remind yourself why you’re budgeting, especially during times when you don’t want to.

For example, if you’re saving for a family vacation, put a photo of your destination as the background on your computer. Or if you’re trying to eliminate debt, make a list of things you want to do with the extra money you’ll have when you pay off your last loan.

Regardless of why you’re budgeting, reminding yourself why you started can help you stay focused.

Bottom line: a budget helps you save more money
A budget can be a powerful financial tool, but it won’t work unless you use it. When you start budgeting, consider various methods and tools to make sure your budget is the best for you. Then do everything you can to stick to it each month.

Over time, you may notice that your financial situation or your preferences change. At that point, it’s important to remember that you’re not tied to your current budget. You can always switch to a different budgeting app or try a new method to see if it works better for you.

The most important thing is to consider why you want to budget. Remember your reasons for staying motivated.

For more job updates and recommendations, visit mextechy.com.ng


Leave a Reply

Your email address will not be published.