Whether you have just started living on your own or recently got married, it’s important that you have a budget to control your income, expenses, and potential savings. This not only lets you live comfortably throughout the month, but also draws a clear path to achieving your most important goals.
If you have never lived by a budget before, this might appear as a near impossible task. But once you learn the ins and outs of budgeting, you can see how it is as simple as labeling different portions of your income for a better life.
To support you on this journey, here’s a guide to budgeting and owning your finances.
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Budget With Your Net Income
In order to start budgeting, you need to understand your overall income. Many people make the mistake of budgeting with their gross income, only to feel stranded once their taxed income comes out lower than that figure. That’s why, you should take your time to figure your net income for proper budgeting.
Choose a Budgeting Method
Once you determine your net income, you can start finding the best budgeting method for yourself. With options ranging from cash envelope budgeting to zero-based budgeting, you can pick an approach that makes you feel comfortable, while also giving you a better handle on your finances. This goes a long way towards improving your financial responsibility.
Understand Your Expenses
After you put down your income in your budget, you should take a beat to understand your ongoing expenses. This includes monthly spending like buying groceries, paying rent and utilities, as well as paying off your credit union auto loan. While performing this practice, make sure to be accurate in your details to avoid issues in the future.
Prioritize Your Obligations
As you make your budget, ensure that you prioritize your obligations over other expenses. For example, if you have jotted down $900 for rent and $120 for streaming subscriptions, make sure that the $900 takes priority despite being the bigger amount. You can use items like a finance journal to easily follow this tip.
Put Together a Grocery Budget
Even as you set aside some money for groceries, it might be too much or too little for what you need. Due to this reason, you should visit this section of your budget in more depth and itemize each expense. This can save you from spending unnecessarily and may even lead you to find options like a discount grocery store.
Make a List of Your Goals
After taking care of your essential spending, write down your major goals. This could be anything including but not limited to buying a home, getting a gaming PC, or having a lavish wedding. You can then jump back into the calculations and figure out ways to make major purchases or follow tips for a budget-friendly wedding.
See Where You Can Save
Now that you have your goals all lined-up, you can check to see if there’s any wiggle room in your budget. From shopping during a sale to contributing small amounts towards your savings account, you can follow different ways to save money. You can also use solutions like a discounts browser extension and coupons app to save your funds.
Build an Emergency Fund
While you save your money, you should also focus on building an emergency fund. This fund has at least 3 months of your monthly spending saved up, which can cover emergency expenses like medical costs due to sudden illness or loss of income due to unemployment. This tip goes beyond budgeting and delivers a safety net to you.
Cut Back Your Spending
When you start saving money, it becomes easier to buy what you want, when you want. But this habit goes against the very structure of a budget. That’s why you should hold off on unplanned purchases and always focus on following your budget. This can slowly but certainly build your wealth in the long run.
Keep Monitoring Your Budget
Whether you are following tips for the loud budgeting TikTok trend or suggestions for the 50/30/20 rule, it’s crucial that you keep tabs on your budget on an ongoing basis. This practice of performing monthly or quarterly reviews makes sure that if something isn’t working for you, you can change it until it starts showing benefits.
This guide lays out an easy road to financial bliss, but without demanding too much from you. In turn, you can unlock the doors to a comfortable life without taking on the weight of the world on your shoulders.
