How to budget and meet your financial goals

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Making your own monthly budget doesn’t have to be complicated, but it can be tedious and downright boring when you’re just starting out. After all, create a spending plan often means cutting out areas that you might enjoy, such as dining out and entertainment. If you also have a pile of debt dragging you down, your monthly budget may also be constrained for a while — at least until you handle your most naughty bills.

Plus, budgeting is an ongoing process and it’s easy to see why so many people don’t do it. Emily Guy Birkenco-author of money management book “Stack” say that, in that sense, budgeting is like doing your laundry. “This is not a one-time job and there is no shortcut to having to deal with it often,” she said.

With that in mind, the key to successful budgeting is to make it fun and regular. Birken says you should ask yourself a few important questions before you get started. For example, would you be happier with a weekly money check if you took your laptop to the coffee shop? Can you turn tracking costs into a game? Finally, how can apps and programs help you deal with the things you don’t like?

The more you can do to ease the budgeting burden, the more likely you are to succeed. spending planWOMEN will stick. So, as you prepare to financially plan your life once a month, here are six steps to help you build an effective budget.

First of all, you will need to know where your money has gone. This usually involves breaking down your bank statements and credit card bills for at least the last six months and reviewing them to add up how much you’re spending on both essential and non-essential purchases.

For example, looking at last month’s statement can make you realize that you’re spending too much at the grocery store or that your Amazon spending is out of control. Maybe you find your hobby is taking up a large portion of your income or that most of your discretionary money is going out to eat.

Armed with this information, you can move on to the next step of the process.

Step 2: Write down all your expenses and monthly bills

black man writing in budget book

On a piece of paper, take the time to write down each necessary expense and the invoice that arises each month. This includes fixed costs like your rent or mortgage, insurance premiums and car payments, for example. However, you’ll also want to estimate the cost for any variable expenses you have, such as groceries, utility bills, and your car’s gas.

Also, be sure to list any debts you have and their monthly payments. For example, list minimum payments on credit cards, personal loans, etc. Once you have an idea of ​​your regular, mandatory expenses, you’ll know what you’re dealing with.

Next, you’ll want to write down a general estimate of how much you’ll earn in any given month. Obviously, this step becomes easier if you get paid or hourly rate for a fixed number of hours.

If you have variable income, get your pay stubs for the last 12 months to calculate your estimated earnings for each month and use that as your income base.

With your necessary monthly bills and expenses in one column and your income in another, you can start planning your spending to fix the problems and money leaks you discover when track your spending from previous months. For example, you might redirect discretionary spending toward dining out to pay off your debt faster, or you might decide to move that money into a savings or retirement account instead.

Ideally, you’ll write down a new budget that uses your income to cover each fixed expense you have while helping you reach your goals. This applies whether you want to save more of your income for the future or if you want to focus on paying off debt. Or perhaps you want to build up your emergency fund just in case. Maybe you want to do a little bit of each. Either way, your new budget should accommodate whatever you hope to achieve.

From here, you can also decide how you want to spend your money in the future, such as whether you want to continue paying your bills with your credit or debit card, or if you want to switch to a cash envelope system. to avoid card usage altogether.

Step 5: Ready to adjust and modify

Couple using cash to buy at the store

With a new monthly spending plan written down, you’ll want to spend the next month tracking all the different numbers. If you want, you can even mark items out of your budget as they’re paid. You should also track spending in different categories like groceries, gas, and dinner for the month.

In the meantime, you should plan to make mistakes! Birken says it’s easy to see a deviation as evidence of something negative, but it doesn’t have to be. Not only that, but regularly reverting to good habits has a bigger impact on your financial health than falling apart from time to time.

As you strive to improve your budgeting strategy over time, just remember that there is no such thing as perfection in any human endeavor. “You’re aiming for progress, not perfection,” she says.

It is natural for some aspects of your budget to change over time. After all, you may lose the full cost of paying off your debts, and you may encounter unexpected fortunes that can help you go further. Of course, the reverse is also true and you may find yourself making less money in the years to come.

Despite that, Birken says it’s important to remember that the timelines for your goals can change, and they will likely change. “Leave room in your plan to be flexible, change your mind, and adjust your expectations,” she says.

Whatever you do, take the time to write down a monthly spending plan and stick to it as much as possible. You’ll have good months and bad months along the way, but follow your plan as best you can, then rinse and repeat.

Budgeting isn’t rocket science, but it’s one of those tasks that’s too easy to put off. If you feel overwhelmed by the mere idea of ​​creating a spending plan, make sure to search free budgeting tool that can help you stay on track while monitoring discretionary spending and fixed costs. Maybe you can find a budget spreadsheet or budget tracker that you love, or maybe you can create a personalized budget template that fits the way you think.

If you need help, it never hurts to contact a fee-only service Financial Advisor, one in two. After all, financial advisors can help you plan your investments, but they can also help you map out your goals. Sometimes knowing what you want out of life can act as motivation to budget for the money you work hard to earn.

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