Are you looking to uncover the secrets on how to start a budget?
Of course you are, but the real question is, how do you start a budget you can commit to?
Smart financial decisions, lifestyle changes, and consistency is all it takes to build a reliable budget.
By simply monitoring what’s going in and out of your bank monthly, you get a rational idea of your overall financial condition.
This includes your income, expenses, emergency deposits, loans, mortgages, insurances, taxes, and much more!
Most people think of budgeting as a cumbersome task.
That’s mainly because you learn to tame your temptations for spending extravagantly.
The reality is, budgeting isn't optional, it's necessary. The right budget won't stress you out or take the fun out of life. Instead, it'll do the opposite!
If you're looking to learn the best way on how to start a budget, keep reading.
Why Do You Want a Budget?
A budget helps to keep an eagle's eye on your spending so that you can save up more for your future.
Budgeting is a straightforward way to compare monthly income with your expenses. Most of the time, people spend more than what they're getting, thanks to credit cards!
I’m not all against credit cards, but bid farewell to credit cards once you get more financial freedom.
No matter how handy they seem, you pay an extra price for this service.
Especially if you have tons of outstanding balance to be paid with an incurred interest rate, it's not less than a nightmare.
Paying off credit card debts is one of the significant reasons for budgeting for beginners.
For any successful budgeting experience, ask yourself, “why do you want a budget?”
This question defines your purpose behind budgeting. It could be to pay your current debts, to save money for insurances and emergency funds.
Or you want stable future investments to enjoy the retirement age without financial restrictions. Maybe you want a great holiday trip to your favorite destination.
Wait, did I forget to mention your dream business?
It can be a few steps away.
There can be multiple purposes of budgeting depending upon person to person and their circumstances.
The key is to find that purpose because you can never reach a goal if it’s of no importance to you.
In short, a vital purpose is a driving force for having a budget.
Religiously sticking to your budget until you achieve your milestone is another perk of a big goal!
How to Avoid the Common Budgeting Mistakes
Raise your hand if you suck at budgeting.
Well, I can see tons of virtual hands up in the air. That’s all right; I have to admit it’s a challenging task, but an achievable one.
Just avoid these mistakes while budgeting for a successful budgeting experience.
While you’re starting a budget, set realistic goals, you can do so by keeping a balance between your income and expenditure.
If you’re trying to save up to 50% of your salary, you might starve yourself.
Extremism is not the key; rather, it will demotivate you and bring you back towards negative spending habits.
The key to effective budgeting is considering all expenses, including the necessities, emergency funds, medical funds, debt payments, etc.
Whatever is left should only go for savings and investments.
People make the common mistake while budgeting to not include a percentage of their income for entertainment and unwinding.
It’s human nature to enjoy, have fun, and spend for his amusement. Depriving yourself of all the fun can bring emotional issues into your life.
There’s no point in saving loads and loads of money while deteriorating your mental, physical, and social wellbeing.
Another mistake people make is giving up on budgeting altogether when things don't go their way. It's ok if some difficulties altered your budget for a while. Just give it some time.
Once you see the fruits of budgeting in terms of savings, you’ll get more enthusiastic about the budgeting journey.
What Is A Budget Supposed to Do?
Budgeting is a life-saving tool to reach financial freedom. It's another name for strategic financial planning.
A budget helps in mindfully tracking your expenditures without unnecessary spending. You only buy items as per a specific quota you’ve set aside for them.
This approach is the key to a debt-free life.
Getting through the month successfully without depending on your credit card is an incredible feeling!
You can easily stay away from debt with smart budgeting.
Another great advantage of budgeting is the financial confidence it builds in a person.
When you’re living a disciplined life, meet all necessities; no debts on your plate are firmly about your finances.
You can achieve this feeling through consistent budgeting, which sets you to an ever higher goal-the path towards financial stability.
Budgeting helps save, meaning you’ll have an extra amount of money at the end of each month!
You can do multiple things with this reward-money, which gives you a sense of financial relief. Think of a rainy day fund, an emergency fund, insurance, or profitable investments.
You can deal with any financial crisis without knocking on various doors at the eleventh hour!
How to Start a Budget With No Money
The famous question every other millennial is asking these days, how to budget money on a low income or no money at all?
If you’ve no job currently or working at a low-paying job, don’t worry! Many people are going through the same situation while managing their finances like a pro.
You just need to think smartly to get started with your budgeting journey.
You desperately need to cut your expenses at the moment by following some easy steps:
- Think of living at your family’s getting rid of the rent payments.
- Try to cut short your bills by saving electricity, gas, and water. (You can do so by Installing LED lamps, avoiding long showers, leveraging cost average for utility bills, etc.)
- Seek government opportunities for unemployed citizens. If you qualify for one, your housing, food, and the government will cover the healthcare expenses.
- Check if you’ve got an emergency fund or a rainy day fund; use it immediately to sail your financial boat.
- Look for remote work to save up transportation costs.
- Side hustles can be life-saving during unemployment diaries. (worn-out selling clothes, old furniture, valuable jewelry are simple ways to maintain your finances)
Once you’ve cut your expenses and begin earning from side hustles, start your budget.
Meanwhile, don’t forget to look for full-time job opportunities on the go. A stable job can offer more financial options and guaranteed long-term earning.
Always separate necessities from wants. That way, you can make a realistic budget to support your financial decisions.
Analyze Your Spending To Crush Bad Budgeting Habits
List All Your Monthly and Annual Expenses
This list should include all your fixed expenses, including credit card, student loan, and car loan payments. If you have a rental residence, include your house rent as well.
Next comes the charges for utility bills, phone bills, and internet services.
Another significant expense to add to the fixed list is insurance and tax payments.
List Variable Expenses
Once you’ve completed the list for fixed expenses, write all variable costs. Stuff like food, apparel, and miscellaneous items can vary from month to month.
If you’re a more disciplined shopping attitude, you can add these items to the fixed expenses list.
Don’t forget to include home renovation, car repairs, medical emergencies in this list.
Download Monthly Banks Statements
To clearly understand where your money is going, download bank statements, receipts, credit card statements.
Ensure you track all statements and receipts from the past two to four months to know your spending pattern critically.
Use Budgeting Apps
If you’re looking for an easy automated way of knowing your expenditures, go ahead with budgeting apps like Mint. This app helps you with a 360-degree view of your spending patterns.
Once you enter your income, expenditures, and the amount you want to save on a daily or monthly basis, budgeting apps allow you a daily budget for spending to reach your saving goals.
Manually Enter Your Expenses
If you’re not comfortable using a budgeting app, think of manual ways. Budgeting isn’t that difficult; just grab a pen and a piece of paper.
Write your total income, fixed and variable expenses in separate columns. Add your costs combined and later subtract them from net income.
Voila! You’re left with the excess amount.
Try doing the same thing with spreadsheets. Both give the same budgeting experience and more control over what’s going in and out of your pocket.
Use A Reliable Calendar To Get Results
A great way to budget is via budget templates and calendars.
Set up a Google calendar to keep track of your bills, appointments, and commitments. Separate monthly expenses from irregular ones.
Using Google calendar for budgeting is very similar to scheduling your appointments.
You’ll have to spend one-hour maximum to enter all utility bills into the calendar, well before the due date.
Later, you can keep track of paid and unpaid bills on the go without brainstorming and headache.
Different colors for separate bills for a categorized distinction. Don’t forget to include maintenance dates for plumbing, security alarms, car service, etc., every quarter.
It's always better to keep things in control before they eventually burst up, causing much strain over your budget.
Digital calendars can be great for saving money in multiple ways. Simply schedule the end-of-season sales on your calendar to save money while buying quality stuff.
Also, plan your insurance bills, retirement funds, emergency funds on a separate calendar naming “future investments.”
Try setting up various calendars to keep track of multiple categories. Here some categories to help you get started:
- Utility bills
- Maintenance bills
- Seasonal sales
Understand The Money You're Bringing In
The common mistake many people make during budgeting is not accurately adding up their income resources.
The rule of the thumb is always to include your minimum salary. It shouldn't include irregular side hustles, potential bonuses, overtime pay, etc.
If you earn anywhere between $2000 to $4000 monthly, add $2000 as your total monthly income in budget.
After you’ve subtracted all taxes, health insurance payments, and retirement funds like 401(k), you’ll have the actual income to add to your budget.
That way, you’ll reduce tons of financial stress and end up saving way more than you expected.
If side hustling is a common form of earning along with a full-time job, then you must add the income from side hustles into the budget.
After you've truly understood your income, divide your income through expenses, debts, and extra money.
That extra money should be anywhere between $10 to $100 to make a successful budget.
Create Financial Goals That'll Inspire You
Budgeting will be meaningless if you don’t see behind it. Ask yourself, “why am I getting into this budgeting journey? What outcomes do I desire from it?”
My tip is only to begin the budgeting process when you’re very clear of your financial goals.
Remember, these goals are the driving force towards keeping yourself intact with a practical budgeting routine.
While setting your goals, make them specific, achievable, and realistic:
- Getting rid of credit card debt in 2 years
- Having an emergency fund by saving 50 to 100 dollars each month
- Saving 1000 dollars annually for a dream vacation next year
Let me tell you another great tip, you’ll fail many times, and that’s not the end of the world.
Don’t be harsh on yourself while you cannot stick to your financial goals. Instead, view it as an opportunity to grow by avoiding the same mistakes in the future.
Tracking your progress is another great way to stick to the goals. While you’re doing well with your daily, monthly, or yearly plans, you’ll become more confident and focused.
Don’t forget to reward yourself whenever you accomplish any of your financial goals. A little fun on the way is not nasty at all!
Choose Your Ideal Budgeting Method
Congratulations! You’ve tamed your finances with a weekly budget.
Now, what's next? How will you form your budget in the first place?
Thankfully, you don’t have to pen down every transaction, spending, and savings manually. Today you can find several ways for an efficient budgeting experience.
Start with a budgeting app, a free version for now, if you’ll reconsider your decision for the app later.
Mint is an excellent free budgeting app that saves a lot of your time and effort in manually forming your budget.
This app connects with your bank account and monitors every transaction. The best feature of Mint is that it specifies each spending in your pre-formed budget categories.
It allows you to have complete control over your expenses and spending. It’ll also notify you whenever a due date is coming your way. Be it bills, credit dues, mortgage payments, and more!
YNAB allows you to have a budget for each dollar coming your way.
Not only you’ll monitor your budget, but it also requires its users to set up a financial plan. That’s a fantastic opportunity!
If you’re a student, reap additional benefits from this app as only enrolled students can get a free one-year trial of YNAB.
Ibotta is a money-saving application that allows a user cash-back on each purchase. All you need to do is complete some simple tasks to qualify for cash-back.
These tasks range from short product reviews, comments, or quick quizzes.
Later you can get your cash from the store you shopped online, showing them an Ibotta receipt. This app is a lifesaver while budgeting your expenses.
You can enjoy shopping while getting up to $10 to $300 cashback.
Besides applications, you can choose from several budgeting tools, including budget calculators and budget templates.
You can use online budgeting calculators or budget templates offered by Microsoft Excel and Google sheets.
These templates are downloadable, incorporating formulas, dates, categories to form your budgeting calculations on the go.
Add Meaning To Your Budget
Simply having a budget will not do good to you.
The major challenge is religiously sticking to your budget.
Start by setting yourself accountable for each spending you make. Keeping an eagle's eye on your budget will help you go through the budgeting journey.
You need to split your goals into monthly, weekly, and daily goals so that you can keep track of your progress.
There’ll come many times when you’ll feel the temptation to put your budget into the trash.
It happened to me as well when I bore unplanned travel costs last year! I could not keep up with my budget for the next four months.
Eventually, I started over again; this time, I set aside a savings category in my budget, naming it “miscellaneous expenses.”
I learned from my mistakes and began my budgeting journey with more planning and determination.
I know now whatever expenses I might have in the future, they’ll not affect my budget as severely as they did before.
Remember that difficulties are a part of life; the same goes with your budget.
It can go beyond your financial boundaries in certain circumstances. To keep yourself from getting demotivated through the ebbs and flows of your budget, it's always wise to set up emergency funds.
Having extra savings specifically for gifts, vacations, and entertainment is fantastic to sail smoothly on your predefined budget.
Next time when you reconsider your budgeting decision, remember your goals. Ask yourself:
- Why did I budget in the first place?
- What do I want to achieve financially?
- Do I want to be financially stable at retirement age?
Reflect upon these questions, and you’ll most likely get back to your journey towards financial freedom. This time with more enthusiasm and perseverance!
Automate as much as possible, so the money you’ve allocated for a specific purpose gets there with no effort.
Automate So You Save Money Painlessly
A very excellent way to deal with your financial decisions is by using specific tools and apps which automate the budgeting for you. It saves a lot of your time, money, and effort.
Let’s see how you can automate your savings:
A handy way to deal with your budget is through this fantastic app, TRIM. It works as your assistant to carry out financial tasks on your behalf.
It monitors your spending behavior and takes economic action accordingly.
The goal behind using TRIM is saving more and spending less!
Thankfully, this financial app can negotiate your bills (phone, internet, cable, medical, etc.). The best part is-It can cancel subscriptions you no longer use! (of course, with your green signal)
Besides, it can serve as your automated savings account, rewarding 4% annually of your deposited $2000.
Another savings app I’ve been using is Digit. It works the same as TRIM, sneakily putting dollars from checking accounts into the automated savings account every few days.
Digit takes care of your debt payments, savings, and investments equally well.
Know that it's an app specially designed for you if finances management is an overwhelming task, that you keep procrastinating.
Bank Auto Transfers to Savings Accounts
A great way to entertain extra savings each month is via having multiple savings accounts. Yeah! Set up as many saving accounts depending on your goals.
You can have a separate account for retirement, vacation, maintenance costs, miscellaneous events, etc.
By doing so, you can make your money grow on a stable interest rate in multiple savings accounts.
Once you’ve put your money in automated savings account, it's hard to use the funds without additional effort.
Chances are, whatever’s going into your savings account is not coming back until you reach your specific saving goals for each account.
Unsubscribe From Services Your Rarely Use
You probably do not know how much your debt, your money via services you don’t even use regularly. I’m talking about TV cables, magazine subscriptions, club, and gym memberships.
No worries, I’ve come up with superb alternatives to these!
What about going to a library instead of buying books and paying for magazine subscriptions!
More effective alternatives to a TV cable are none other than Netflix and Hulu. If you've already subscribed to such entertainment services and don't use them, you better unsubscribe.
As far as club memberships are concerned, find other cheap ways to socialize and have fun.
Remember to stick around with like-minded individuals to stay focused on your financial goals. An affordable alternative to fitness clubs is jogging, running, bicycling, and working out at home.
After you’ve done all the mentioned steps, get ready to drag money to your savings account instead!
Slice Through Your Unnecessary Expenses
There are multiple ways you can trim your expenses like a pro.
The key is to eliminate the things you don’t regularly use, like TV cable, club memberships, magazine subscriptions, etc.
Another way is to find cheaper alternatives to your daily-life commodities and household stuff.
Try changing your residence to a rural or suburban area, where rent, utility, and grocery prices are. This way you can save a lot of money. (If you have a remote job already, it’ll work like magic!)
Switch to the mobile prepaid billing method to cut short your monthly phone bills. Let me tell you. Most of the time, you’re not even using your phone but paying an account, anyway.
You might think it's not a big deal, but in your financial freedom journey, every penny matters!
Never underestimate the power of negotiation. Be it your student loans or credit card debts, ask your bank for a consolidation.
It can combine all of your debt into a single loan with a potentially lower interest rate.
Look for loan-weaving programs that some governments offer to students. Take full advantage to weave off your student loans, which in most cases is achievable.
Build Multiple Income Sources
Budgeting gets more fun when you’ve multiple sources of income!
Think of side hustles to support your financial security. Technological advancements have made side-hustling easier than before. Here are a few side-hustle ideas to get your creative juices flowing:
Today, you can earn from reselling old stuff your skills and talents. All you need is a little planning and Voila!
First, try selling your old possessions on eBay better than being paid for getting rid of unwanted items!
Besides, you can consider Craigslist, The Freecycle Network, The ReUseIt Network, where you can get used stuff free of cost. Later you can sell it on eBay or Amazon.
Drive for Cash
Registering yourself on Uber or Lyft and getting paid for each trip you take is another incredible side hustle.
You can use the feature of “going my way”, which allows you to pick up rides intended for the same destination as yours.
Imagine earning from simply traveling for your interests, a shopping mall, grocery store, and whatnot!
Doordash is another simple way of extra income by delivering food, groceries, medicines from door to door. It's a terrific way to generate thousands of dollars per month!
Besides, if you like shopping and packing stuff like me, being an Amazon prime shopper can be a fun side hustle for you.
You can decide your working shifts on the get paid weekly by Amazon.
Note that it’s not an online job, so you have to be physically available for all the shopping and packing duties for Amazon’s customers. However, a perk of working a “real” job like Amazon is that you'll have a consistent income as long as you work.
Freelance Doing What You Love
Freelancers are earning up to five thousand dollars monthly by just doing what they love! Explore what talents you got and start earning from them now!
You can choose from a long list of services to sell, including writing, data entry, virtual assistantship, tutoring, graphic designing, and many more.
Register yourself for free on freelancing platforms like Upwork and Fiverr, and get started with a side income.
During the first few weeks, set your pay rates at a minimum to attract more clients.
Once you have an established profile with five-star ratings, you are equivalent to a full-paying job.
Start a Blog
Another sustainable side-hustle is blogging!
If you have a passion for writing, nothing would be more rewarding for you than getting paid for merely penning your thoughts down.
To earn from your blog, you have put in consistent efforts in building a specific audience.
Later you can sell products, get sponsorships, and show advertisements on your blog for a source of money.
If you plan to start a business in the future, set up your blog according to your business idea.
That’ll save up many marketing costs for you, as you'd have a refined audience already.
Think and keep watering your plant of blogging for a long-term earning approach.
A Bright Future Awaits With Your New Budget
You’ll hear things like I suck at budgeting; budgeting is boring, it's a headache, etc.
The point is to never give up on the process; the ultimate financial security you’ll get will outpace all the cons of budgeting.
Building a successful budget and sticking to it is no doubt a difficult task.
All it requires is a strong ambition- a goal big enough to keep a challenging task you going!
Think about the dream business you always wanted to have. That dream car you once believed you could never be yours within three years.
Your desire to live the lifestyle you always wanted is a few steps away!
Question yourself: How much fun do you want in your retirement age? Or would you live an old age below your current means?
If your answer is getting a fantastic lifestyle with your bank account soaring with money you saved and invested smartly.
Then challenge yourself!
Your biggest opponent towards the financial freedom path is no one but yourself!
Make these your challenges and show yourself you can get financially stable.
Remember, nothing happens overnight! Follow your budget religiously to reach financial freedom.
Stick to your budget and keep a close eye on your spending. Meanwhile, mapping your future with the right financial decisions like budgeting can be fun.
Don’t forget to reward yourself with fun treats, outings, hangouts, and movie nights after each accomplished monthly budget.
Your most significant investment is in yourself.
So, when are you starting your budgeting journey to kick start your savings?