- Know your habits
Track your monthly expenses for a while so you know what you spend your money on. Gather all information you need such as your tax returns, your bills, your statements etc. in a spreadsheet or even some kind of budgeting app.
2. Set up your financial goals
List and sort your financial goals. Why not using categories? Short term goals vs. long term goals or leisure vs. necessities.
Just keep in mind that short term goals are goals that should take no longer than 1 year to achieve (ex: holidays or paying off your credit card debt). Long term goals are those requiring several years to obtain the necessary amount you need (ex: a new car, retirement, children’s education etc. ).
Your financial goals can change over time so don’t forget to update your list from time to time.
3. Know your income by doing the math!
Even if you are not an expert in math I’m sure you’ll be able to subtract your regular expenses (food, clothes, rent) from your income (salary, allowances, benefits) to figure out the amount you can set aside for your financial goals. And remember: your expenses should not exceed your income!
4. Categorize your entries
Your budget can be divided in two categories:
- Fixed expenses such as your rent or mortgage
- Variable expenses such as food, fuel for your car, entertainment etc.
… or in three by dividing it like this:
- Needs that would correspond to fixed and variable expenses
- Savings for emergency funds , for your retirement etc,
- Wants which is everything else you want !
In the end, it is up to you to decide what works best for you.
5. Reward yourself
Even if it sounds strange, “rewarding” yourself is very important. Each month you should set aside some of your hard earned money that you use for something fun.
6. Expect the unexpected
One of the famous quotes from the movie Forest Gump goes: “Life is like a box of chocolates, you never know what you’re gonna get!” This is exactly why each month you should also set aside some money for emergencies such as car repairs, a new refrigerator etc.
7. plan and monitor
A budget will help you identify wasteful expenditures, adapt quickly if your financial situation changes and achieve your financial goals easily.
8. Don’t give up …
Like with sports or a diet, doing it and sticking to it isn’t easy! Keep to your budget for a few months and you’ll see your stress level decrease because you are in control of your financial destiny. With a budget … there are no surprises !
To budget freaks as well as non-budget freaks, budgeting is just being smart with your purchases, clever with your savings and brilliant with your financial achievements.
Do you have other helpful tips?