Living paycheck-to-paycheck gets to be difficult and is generally unreliable. We have to be efficient and effective with our money to feel comfortable with where we are in life. One way to maximize your earnings is by having a plan called a budget.
The hardest part of making a budget is starting. You can ask yourself why you need a budget, and what you can do to stabilize your financial situation. Setting goals and understanding what’s most crucial to your living needs creates a momentous foundation for your budget. Prioritizing expenses may vary week to week, but as time goes on, regularities in your budget show and become more predictable.
Click image for a downloadable template
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.
When you find the right, consistent budgeting formula, you can begin to tune and refine it. Your spending habits may change as a result, and you’ll filter out what you need and what you don’t. The money you save up from meeting your budget will accumulate as you spend responsibly.
That includes using a credit card in a proactive way. If you think you overuse your credit card and can’t pay your bills, then cancelling the card may not be the answer. In fact, keeping the card and not using it may be part of the solution. Tuck it in your sock drawer.
This way, your credit score will go up as your bank sees you being responsible and reliable with your expenses. Having a favorable credit score gives you more flexibility with your budget, as you now plan your expenses more effectively.
There are plenty of tools you can use to help build the budget that suits your lifestyle. Check out apps like Credit Karma, Mint, Acorns, amongst others that give you a proper foundation for a budget.
Big numbers and bills can grow at the blink of an eye when you aren’t being careful, but there’s no need to feel overwhelmed. The time you take to budget your daily life will be well spent. Those baby steps will improve you and stick with you forever.
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What to do in the Next Recession | Avant-Youth · January 27, 2020 at 5:36 am
[…] up a nest egg as a backup can save you from a world of hurt in the next recession. Creating a budget and cutting down excess in your spending habits on non-essential items (manicures, video […]