Table of Contents
Budgeting is a fundamental part of personal finance and managing your money. The current financial climate with high inflation demands that you make the most of your money and plan. This article budgeting 101 will provide you with all the information you need to start budgeting and keep it going in 2024 and beyond.
We all know that the best way to save money is to spend less. But how do we do that? Really.
The simple answer is to create a budget. A budget is a plan for managing your money and spending it wisely over a month or a year.
A budget is a tool that can be very beneficial in helping you achieve your financial goals and better your finances. By following a disciplined plan, you will be able to increase your savings, pay off debts faster, live more comfortably, and possibly even retire early!
In this guide, you’ll learn everything you need to know about personal budgets: what they are, why they’re important, how to create one of your own, and more!
Budgeting 101: Elements of a Budget
A monthly budget template is a spreadsheet that helps you track your expenses and income. It can be used to create a budget for a month or to compare spending habits with past months. There are several tools you can use to help you; like Microsoft Excel, Quicken, Spreadsheets, Sofi, Budget Planners, etc.
A good way to start is by looking at your income and expenses from the last three months. Then, categorize each expense as either fixed costs or variable costs. Fixed costs are the same every month, like rent or car payments. Variable costs change from month to month, like groceries or gas prices. Finally, add up all your fixed costs and subtract them from your monthly income to get your monthly budget amount for variable expenses.
A simplified budget can be broken down into different sections, such as income, savings, monthly expenses, and any other planned expenditures. The template below can be used for a monthly budget:
Monthly Expenses $__________
Other Planned Expenditures $__________
How to Create a Personal Budget in 5 Easy Steps
1) Identify your income streams and expenses:
You need to find out how much you earn and how much you spend.
2) Build your budget: Once you identify your income and expenses, the next step is to set your budget for both things.
3) Monitor how much you spend: The final step is to track your spending so that it aligns with the budget that you have created.
4) Stick with your budget plan: It’s important that once you have created your plan, you follow through. You should make sure to stick with your plan to stay on track and not be discouraged by the small obstacles that may come along the way.
5) Keep in mind that each step is a stepping stone to the next: It’s important to remember not only what you are doing today, but also what you are going to do tomorrow.
Tips to improve with a Balanced Budget
Knowing how much money you have in the bank
Knowing what your monthly expenses are
Knowing how much money you can spend on things like entertainment or travel
Having a clear idea of what your financial goals are and knowing whether they are within reach or not.
Balancing your budget is an important part of personal finance. So, make sure to keep track of your spending habits and be mindful of how much you spend on food, clothes, entertainment, and other expenses. After all, it is better to be aware of what your money is going towards so you can make informed decisions about how much money you want to save or spend each month.