No matter how much income you have, if you don’t budget your money, you will find yourself with no money at the end of the month. Even if you take on a side gig, if you do not budget your money, your side hustle income will do little to help you cover your monthly expenses. You’ll be living paycheck-to-paycheck, trapped in an endless cycle of financial stress.
Budget Your Money So You Have More of It
Regardless of your income level, you still have dreams, right? One might be to stop living paycheck-to-paycheck. Maybe you want to get out of debt, open a savings account. You might want to go back to school or take courses to help improve your income.
Even if you don’t have much money, it’s okay to dream about all the things you want to do in life. Budgeting your money is the only way to turn your dreams into reality.
Budgeting is the only way to control your cash flow and meet your financial goals. When you go through the process of creating a budget, you might be surprised to discover that there’s money to save. Or the opposite—that you have more bills and debt than you thought. This will be a serious wakeup call to slow down the spending and start living within your means—the first step to getting out of debt.
How to Budget Your Money
Budgeting can feel like a boring, painstaking process. You have to make time and organize your financial life. But budgeting is the blueprint for what to do with your money. Without it, you will never have the money to turn your life dreams into reality.
So, let’s get into how to budget in a stress-free way.
Your Income. This is easy if you work for someone else and receive a paycheck. Plug this amount into your budget under income. If you receive income from other sources, plug this amount in too. If you work for yourself and your income is not regular, you will need to create your budget differently. Read this article for tips on how to budget your income when it is not steady.
Your Expenses. Spend one month tracking every cent that you spend. If you are disciplined and organized, you can do it manually on excel or some other software. But apps make it much easier and you don’t have to worry about forgetting. Try Mint, for instance. It’s free. Mint connects to your checking and savings accounts and credit cards. It will digitally track every expenditure. Apps like these give you the most transparent picture of your spending habits.
Tracking the cash you spend is more challenging. We tend to leave the receipts on the table or at checkout. Don’t. Keep every receipt, store them someplace safe. At the end of the month, take out all the receipts and organize them into expense categories. Add the total to your expenses category.
Your Debt. Organize your loans, credit cards, and other debt that you carry. Once you have your total income and expense numbers, plug them into your budget.
Now you have a snapshot of your income and expenses. Review all your expenses. Do you see a lot of waste? Make a plan for reducing it.
Now you are ready to write your budget.
- Keep your goals in front of you.
- Write down all of your fixed and variable expenses and your income.
- Calculate what you need to reach your goals this year. For instance, do you want to get rid of your credit card debt? What’s the debt total? How much do you want to commit each month to debt reduction? Add a category to your budget called “debt reduction.” How about starting a savings account for emergencies? Forget for now the standard advice of how large your emergency savings account needs to be. Just set a goal for yourself of how much you want to start putting aside for emergencies. Add this category to your budget: emergency savings.
- Non-essentials. You need a category in your budget for nonessentials too, like going out with friends. Once you see your fixed expenses, you will see how much you have for entertainment.
Your budget is not static. It’s a fluid blueprint for how to achieve your goals. But it’s only good if you use it and follow it. Check in at least once a quarter to see how accurate you were with your category amounts. Make adjustments if necessary.