Pinpoint your current expenses and where your money goes on a weekly/daily basis. Sometimes the problem lies in the little things we buy, like morning coffee on our way to work, which quickly add up. Other times it’s simple luxuries like a new pair of shoes that look best with a certain outfit.
Find a way to log these expenses down so you can keep track of your money and identify the necessary and unnecessary expenses. And seriously, be honest with yourself: The more frank you are with your needs and wants, the more efficient you will be with budgeting.
Once you calculate your income, start planning by sorting your expenses into different classes such as dining, living, entertainment and savings. Organizing where your money will go leads to prioritizing your expenses based on how necessary they are to your well-being.
A helpful formula that investopedia suggests is the “50-30-20” budget. This budget divides your spending into three percentage categories to which your income [after tax!] will go: 50% on needs, 30% on wants and 20% on savings. How you delegate expenses into each category depends on what you personally value.
People also set aside a part of their budget for miscellaneous expenses, which some call a “rainy day fund.” The part of your budget that doesn’t go towards main expenses (rent, groceries, insurance, etc.) can be used for the random things that may happen to you at any given moment, such as an unexpected car accident or a broken phone predicament.