Thinking it’s about time you took control of your financial freedom? The best way to do that is with a reliable budget. Unfortunately, a lot of people simply don’t know how to get started with a new budgeting strategy. They assume that all they need to do is constantly track their spending and make sure that they’re not using more money than they earn. However, the truth is that managing an effective budget can be a lot more complicated than it seems. Fortunately, we’ve got some quick tips that you can use to understand what a great budget should look like, so you can finally get a handle on your monthly expenses.
Start by Looking at your Goals and Income
The first thing that any good budget needs is a goal. Saving money aside and forcing yourself to regulate your spending every month isn’t always easy. However, if you can visualize the positive outcomes of your hard work, it’s much easier to get things done. Ask yourself what you want to do with your money in the long-term. Maybe you want to go on vacation in the next year or put a deposit down on a new house – it’s totally up to you. Once you know your goals, look at your income. This is how much money you have coming into your life every month. Include any irregular or passive incomes such as rental income and dividends to regular earnings from your job.
A good budget requires you to understand exactly how much money you have coming in and how much you spend each month, so you can determine what steps you need to take to reach your short-term, and long-term goals. You may need to track your expenses using apps, and bank statements for a while to give you a better insight into how you spend.
Understand Mandatory and Discretionary Expenses
Unless you have a net worth like Steph Curry you will want to know exactly where your money is coming from, and going. Once you know how much money you have coming in each month, the next step is figuring out how much you have going out. This is the time when you begin looking at the amount of cash you spend not just on necessary costs like rent, mortgage, and food, but also discretionary fees like vacations, and entertainment.
As you begin to figure out the difference between your incoming and outgoing expenses, you might notice that you need to cut down on your spending to help yourself reach your goals faster. Here, the easiest place to start cutting costs is to reduce the money you spend on “discretionary” items. For instance, you can lower your monthly cell phone plan, stop paying for your Netflix subscription, or eat out less.
However, don’t forget to look for ways to reduce your expenses in the mandatory section too. Switching to a different insurance provider or looking for better offers from new vendors can save you a lot of cash too. Finding places to gather extra money from across your entire budget will stop you from feeling like you have to stop having fun to reach your financial goals.