Create a Budget is a process of determining what one can afford to purchase, consume, or spend. These are made to satisfy wants and needs. Create a budget more than just a financial statement. It’s not just about balancing debits and credits. It’s about making the most of what you have and using it in the best way possible to make your life better. There are 2 stages for creating a budget that works:
1) Decide on your priorities to Create a BudgetWhether you need a new car, house, or just some extra income, it all comes down to what you prioritize in life. A person should assess their priorities and figure out how they can save money fast to meet their goals as quickly as possible without sacrificing their quality of life.
· If a person wantsBuy a new car: They should consider saving up for a certain period before going out and buying one. If the goal is for them to stop driving their current car when the engine is about to break down, then they should start saving now so that they can get a better deal for the next vehicle.
2) Create your goal. A good way to start a plan is by setting a budget. This way you won’t find yourself spending money on items that are not important and lacking the funds for things that are. One needs to make sure that their income is adequate for the items one wants to have a sustainable plan.
Put Together Your Spending GoalsMoney management is a serious and difficult topic to tackle. Creating a budget that works for you takes commitment, discipline, and a lot of effort. It’s essential to be reasonable about your objectives, yet also obstinate about staying with them! By setting achievable goals, you’ll feel happier with your success and motivated to keep going. One way to set realistic goals is by estimating how much money you can spend each month based on your income. Budgeting is not as hard as it sounds, and it does not have to be a grueling process. All you want are a couple of basic moves toward getting everything rolling. There are two forms of budgeting you can use:
- Envelope Budgeting
- Zero-Sum budgeting.
· Zero-Sum BudgetingFor the zero-sum approach, list your salary, savings (including retirement), and recurring expenses (such as rent, and car insurance). From this list deduct all expenses that are fixed or cannot be changed such as your rent or mortgage payments and car insurance premiums. This leaves all variable expenses such as food, clothes, entertainment, etc…
· Envelope BudgetingBudgeting is a skill that many people need to learn. But if you’re living paycheck to paycheck, it can be difficult to spend enough money for one at the end of the month. Sometimes, figuring out a way to plan for your future is just as important as handling your present needs.
Determine How Much Money You Have CurrentlyA budget is a plan for managing one’s financial resources. To find success, you want to know the amount of cash you possess and where it comes from. A budget can be created in many ways, but the most popular is the “50-20-30” method. It is a system that breaks your income into three categories:
- 50% goes towards necessities, for example, lease, food, transportation expenses, and utilities;
- 20% goes towards reserve funds and obligation reimbursement;
- 30% go towards personal expenses such as clothing or entertainment.
Monitor You’re Spending and SavingsYou can use a time tracker spreadsheet, an app like Toggl, or even turn on the timer on your phone. This might not be as accurate as using an app like Toggl which tracks your every minute and then calculates how many hours you spent working at the end of the week. A time tracker for Mac is useful for projects that span months but it does not come with any analytic features to help track your progress over time.
Build Up An Emergency Fund That Will Get You Through Tough Times. Max It Out for Protection against Unexpected EventsAn emergency fund is a cash reserve of money set aside in savings to be used when an unexpected event occurs. It’s here to help protect against financial hardships if you become unemployed, have a medical emergency, or need to act on sudden home problems.
- Set a realistic and achievable monthly goal for your saving rate.
- Get started with a small contribution and work up from there, adding more over time as you can afford it.
- Make sure that the amount saved goes into a separate account so it’s not used for other purposes.