For most people, the New Year brings an opportunity to start fresh. It's prime time to make some changes in your life. One change you should make is finally building a budget you can stick to. Creating a budget you can use year and year again will help you meet your financial goals and keep your stress levels low. Building a budget can seem easier said than done. But if you struggle to stay on track each month, maybe a budget is worth investing your time and energy into.
Whether you're a millionaire, or part of the other 93% of people, building a budget is crucial to financial success. And PS, it doesn't have to be hard. So let's talk through what you need to know to build an accurate, realistic, and successful budget.
How to Build a Budget You Can Stick to This Year
First, look at your income. Second, your expenses. And yes, we're talking about all of them. Next, look at your plans for savings. Finally, never miss out on an opportunity to save a little cash or make some.
You will be surprised at just how easy it is! So, grab a scratch paper and a calculator, and let's dive in.
Building A Budget With Income In Mind
Whether it's from working, freelancing, or a monthly fixed income, knowing what you have to work with is the first step to setting up a successful budget. So, why do we start with your income? Think of it as ripping the band-aid off. Right from the beginning, you will have an exact number that will set the tone for the rest of your budget. In the interest of helping you succeed and not overwhelming yourself, start off with one month at a time. If your pay from your employment (or self-employment) is the main source of income, grab your monthly total from there.
If you are an hourly employee, and your income fluctuates, take a look back for check stubs you received in a regular month. Holiday pay and overtime might look nice, but it will skew every other month in which they do not occur. Keep that in mind.
Total Up Your Expenses, And Yes, That Includes All Of Them
When you're sorting your expenses, do yourself a favor and sort them into two categories: Bills and Wants. For example, your rent or mortgage needs to be paid every month, or soon you won't have a roof over your head. Netflix, on the other hand, is something we can learn to live without.
Do you work remotely, or do your kids learn at home? Then, of course, the internet is a must-have. But ordering out twice a week? Well, it's not that you can't pick up fast food. But if you don't budget it as an expense, don't do it.
One More Note On Bills and Wants
Deciding between what is a want and what isn't won't always be clear-cut or easy. And yes, all subscriptions count. Including that unused gym membership (we're looking at you). One of the reasons people fail to stick to their budgets is because they aren't realistic. And we're not just talking about income estimates. If your lifestyle is busy and hectic and you rely on taking food to go a few times a week, that is okay. It just means you need to plan for it.
A final word about budgeting expenses. Avoid sales that sell you things you don't really need. Yes, it might be a great deal. But if it is for an item or service that you don't really need or didn't plan in your budget, you are just adding to the frustration that comes with overspending.
Making Saving a Non-Negotiable
Nobody wants to think about bad things happening, but it's murphy's law. When it rains, it pours. Yes, you could cross your fingers and hope these emergencies don’t happen. But if you plan for things to break down, paying for repairs or replacements won't demolish your budget. You can do this by making saving a non-negotiable. Intentionally budget your savings as an expense. This way you plan to set aside a fixed amount of money instead of a random amount you just didn't use.
It doesn't matter if it's $25, $100, or $1,000 a pay period. Saving something is better than saving nothing. And, of course, being prepared will save you the most in the long run.
Make Every Dollar Count
The final key to building a budget you will stick to this year is simple: Make every dollar count. Every dollar that comes in and out of your budget should be accounted for. Budgeting that tracks your income and expenses makes managing your finances easier. Not to mention, it will give you peace of mind. Not only will it help you save money and stay on top of bills, but it will get you out of debt faster and help you build wealth.
Are you ready to build a budget you can stick to? Remember, use accurate numbers, record precise expenses, and make every dollar work for you. See! We told you it wouldn’t be too hard.