Whether you are a person who has recently started earning or someone who is earning for quite a while learning to manage that money is one of the best decisions you make for yourself.
Budgeting for the first time is surely a tough job to accomplish but is obviously not an impossible job.
Even thinking of the down payments for any heavy spending you are going for like a house or a car,saving or retirement, saving up for the emergency fund,paying for insurance makes things complex .So,taking your time to make a budget is a good way how you can start.
Here are a few tips which can be of use to you while you are planning to make a new budget for yourself.
Clear your debts –
Be it college loans, credit card bills etc. Holding for long will only result in the interest to accumulate and add to the debt making it an even bigger amount than it already was.
Paying them off firstly before making any new expense is a good idea. Lower them eventually and then eliminate them. This would ensure your financial security and also help you to reduce stress from your life.
Check what you are spending –
Evaluate your recent bank and credit card statements to get an idea of what you are spending and evaluate your income vs expenses.
It is a good thing to take in note every penny you are spending so that you can cut costs where they are unnecessary. By doing so you would see that even the little purchases throughout the month are having huge effect on your overall budget.
Use a 50-20-30 rule for budgeting –
According to Forbes, considering a 50 – 20 – 30 Rule can work wonders. It is a three category budget plan .
Designate the first 50 percent of your income to pay for the essentials like rent,utilities,bills taxes etc.
Second ,use the next 20 percent for reaching the financial goals like saving, paying debts, investments etc.
The last 30 percent can be used for other expenses like dining out , vacations and other non essential expenses.
Do not forget that these percentages are the max you can spend and is just a layout of a budget if you are able to spend less and save more then you should obviously go for that. Also take in note that it is only a suggestion and you can take up any other plans which works for you the best .
Save up more –
Save as much as you can as saving up for the long term is a key to successful budgeting.
Add up to the savings by keeping emergency funds ready for any unexpected and expensive spending that can pop up any time. Have a minimum of 3-6 months salary saved as emergency fund.
Use online apps –
There are a lot of apps and tools available online which can help you to manage your finances easily.
Many of them can connect to your bank account and provide you with updates regarding your spending.
Setting a budget and practicing it is not at all overwhelming and is also a good financial habit to keep. So,go for it as soon as possible and if you are already going on a budget, cheers to you because you are doing a great job.