When it comes to managing money, it can be hard to know where to start. This is why having a good working budget is so crucial.
A budget is a plan for managing your income and expenses. It helps you make sure that you have the money you need for the things that are important to you, now and in the future. More specifically, a family budget is a plan for managing your family’s income and expenses. It helps you make sure that all of your needs are met now and in the future, while also keeping track of who spends what money on what items.
If you are new to budgets, here are some tips that should help you work better with one.
1. Set Financial Goals
Financial goals are different for everyone. Goals can include saving up for a house, buying a car, or paying off debt. With a budget, the financial goal is usually building a savings account for retirement.
To begin with working towards your savings goal, you should come up with an amount of your income to contribute towards it. Most financial planners would recommend saving between 10 and 20 percent of your take home pay. That means if you bring home 5000 dollars a month, after taxes, you should be saving 500 dollars.
Once you have your amount, there are many ways to save money, but the most popular way is to set up an automatic savings account that sets aside a certain amount of money from each paycheck. This way you won’t even notice the money disappearing from your checking account because it will happen automatically and you’ll be able to save more in less time.
2. Create A Spending Plan
In order to create a spending plan, you will need to take a look at your monthly budget and the leftover amount from your paycheck, after contributing to savings. You can then allocate money to all of your budget categories such as mortgage/rent, utilities, food, entertainment, etc.
If you find that you do not have enough money to cover all of your obligations, try not to reduce your savings. Ideally, you want to reduce your expenses and keep your savings goal intact.
3. Make A List Of Expenses
In order for your budget to be useful, you need to have an accurate list of expenses, which can be a challenge. If you are not used to budgeting, you might not actually know what you are doing with all of your money. For those of you in the dark, it might be useful to keep a notebook with you and write down expenses as you pay them. You can then pencil these expenses into your budget.
Here are some of the most common expenses.
- Rent or mortgage payments.
- Utilities, including electricity, water, and gas.
- Phone bill.
- Car insurance or public transportation costs
- Gasoline for your car or public transportation costs.
When coming up for an amount for variable expenses, such as food try to choose an average monthly spend. It is unlikely that you will spend the same amount of money each month, so shoot for the middle ground.
4. Negotiate Bills With Vendors Or Service Providers
Negotiation is an important skill to have as it helps you get the best possible prices for all your purchases. Once you have a list of all your expenses, you can go through your budget expense by expense and look for cuts.
Call other service providers and/or vendors and get bids for the services you need like insurance, internet access and electricity, if you are deregulated. You can then call our current provider and attempt to negotiate a better rate. Every dollar that you manage to save is an extra dollar that you can put into savings, so this is an important part of the budgeting process.
Try to go through your budget at least once every 6 months and look for savings opportunities.
5. Consider Downsizing Your Home
Downsizing your home is a great way to reduce the amount of money you spend on utilities and upkeep. It is not a glamorous thing to do, but living below your means can help you achieve your goal of retirement much faster. Ask yourself if you would rather live in the nicest house that you can afford or if you would like to retire ten years earlier.
It is not always easy to downsize your home, but there are many benefits that come with it besides the actual reduction in mortgage or rent payments. A smaller home will have lower utilities, reduced maintenance costs and will be easier to keep clean and organized.
6. Stick To The Plan
Unless you are an accountant, you will likely consider your budget to be a very boring thing. It is a restrictive document that limits your spending and in many ways limits your fun. It serves an important function though, so stick to the plan.
Whenever you feel the urge to deviate from your budget and spend without a plan, consider the cost. If you get away from your budget, you will be getting away from your goal. Always have the end game in mind as a source of motivation.