We've all been there: You're at the store, about to buy something that you can't afford but you need it. Or maybe you're sitting at home wondering where all the money went because your food budget didn't stretch far enough. Well, I'm here to help. A budget is a way to track how much money you have left in a month so that none of this happens again! Not only will creating a budget help keep you within your means financially, but it'll also give you a sense of peace with your finances.
Decide what you need to spend your money on.
Now that you have a budget, it's time to decide how much of your income you want to spend and where. This is a good place to start:
- Decide what you need to spend your money on. What are your priorities? Do they include paying off debt or saving for retirement, or do they have to buy food and gas? Some people think of their needs as food, shelter, clothing, and transportation. Others think of their needs as healthcare insurance, internet access, and basic cable TV.
It's essential for everyone who has a job (and even those who don't) to pay taxes on what they earn so that there will be enough money in our country's treasury to pay for schools and roads—the things we all rely upon every day but don't have direct control over funding. So when making decisions about how much money comes out of each paycheck from now until death—or retirement—take into account not only what you can afford but also what kind of person/family member/neighborhood member/citizen, etcetera would feel right spending their hard-earned cash in this way?
Set up a budget within these categories.
Once you have your spending categories and amounts, it's time to get specific about your goals. How much should you be saving each month? What do you want to be able to afford for emergencies, fun, and splurges?
To help make these decisions, take a look at the following sample budget:
Consider and plan for any upcoming expenses you know about, such as college or a new car.
While it’s wise to make a budget for your monthly expenses, it’s also helpful to plan for any upcoming expenses you know about. This might include buying that new car, funding college or grad school expenses, taking a vacation, getting married and having a wedding, purchasing new home furnishings and appliances—and so on.
It can be helpful to try out different scenarios using a spreadsheet or other budgeting tool (more on this later) so you can see how much more money you need to save each month to cover these significant expenses without going over budget.
Break down your budget into smaller categories.
Now that you have a big picture of your income and expenses, it's time to break down those categories into smaller ones. Your budget should be easy to use and understand, so breaking down your costs into different sections will make it easier for you to track where your money is going.
Once again, this step involves writing out all the things you spend and need to spend money on. This includes bills like rent or car payments. It also includes groceries, utilities, entertainment (like movies), and school supplies for kids if needed—anything that costs money but doesn't include an annual fee (like Netflix). The list should also include any taxes from each paycheck, such as social security taxes or Medicare tax withholdings from employers (since these are required by law). Don't forget about savings goals, either! These could include college funding for kids or retirement accounts like 401(k)s or Roth IRAs.
Know how much it's costing you for the basics, like food and housing.
Before determining your budget, you need to know how much it costs for the basics: food and housing. These are your most essential expenses. Food costs are usually the most significant expense, so if this is going to be a problem for you, then make sure that food is on your mind when deciding where to live. A good rule of thumb is that if rent takes up more than 30 percent of your income, it's time to consider moving somewhere cheaper.
Make a point of saving every month.
The first step to creating a budget is saving money. You should save money every month, and the best way to do this is by cutting down on your spending.
- Cut back on groceries. If you buy food in bulk at wholesale stores (like Costco), then be sure not to buy too much because it will go bad before it's used up. Buy only what you need instead of buying a bunch of things that will rot in your fridge or freezer for months.
- Get cheaper housing if possible! Renting an apartment or house can be expensive compared to buying one, so consider moving into an older home that has been renovated and modernized but doesn't cost as much per month as renting something brand new would cost. You'll feel better knowing that the place you live is nice enough (but cheap enough) compared with areas where people pay much more than they should just because they think living near city centers is “cooler” than living somewhere else where things aren't as trendy…and who needs all those trendsetters anyway? They're always trying too hard anyways so why bother being friends with them?
If you set up a budget and stick with it, you'll never have to worry again about whether you have enough money.
If you set up a budget and stick with it, you'll never have to worry again about whether you have enough money. You can start small by creating a monthly spending plan and sticking to it until it becomes second nature. You can also use your budget to plan your finances in advance—for example, setting aside money each month for an item or purchase you want to make next year. By planning like this, you'll be ready when the time comes for the purchase—assuming that nothing has changed since then—you'll be ready! In addition to helping people save money and pay off debt faster than before, keeping track of their spending habits is also beneficial because it will help them recognize how much they're spending on things like eating out at restaurants or buying new clothes every few weeks instead of saving that money instead.
And that's how you set up a budget! I hope this guide was helpful and answered any questions you might have had about creating your budget. Don't forget: no matter what kind of financial situation you're in; there are always ways to save money or earn more income. Try some of these tips out for yourself and see how much better off they can make your life!