If you don’t follow a budget, it’s time to start. You can start budgeting at any age, and it’s better to start sooner rather than later. Budgets are hugely effective for people that are prone to making rash or frivolous financial choices, but they also prove beneficial to people that believe they are already responsible with their money.1) Determine Your Spending Categories
The first month or two should be dedicated to tracking every purchase and payment you make. Keeping a log will give you a good idea of where your money is regularly going. After identifying the general trend, you can start separating your purchases into categories. Make a list of all your essential payments, such as rent, energy bills, and car payments. Calculate how much money you have left for the month and see how that compares to your unessential purchases.
2) Stay on Top of Subscription Services
Subscription services are popular for their convenience, but they can also add up over time. You might realize you have upwards of five subscription services running at the same time. Evaluate whether all these services are necessary, and try to choose a few you can live without. Being aware of the cost you’re devoting to subscription services each month can help you make decisions the next time you get a deal on an intriguing delivery service.
3) Determine How Much You Want to Save
The purpose of a budget is to set aside a little money each month. The amount you save will depend on your earnings and essential payments. Create spending limits within your unessential purchase categories to fit the savings you would like to generate each month. Remember that you can change your limits as you discover which categories need more or less money.
4) Budgets Are Guidelines Not Rules
Budgeting does not need to be a scary process. Its purpose is to provide you with guidelines to stick by in order to responsibly manage your money. Some months you might go over your budget, and that’s okay. Just cut back wherever possible the following month to make up for it. There are also times that you may need to move money from one category to another. For example, bringing home a new puppy. You might need to cut back on your fast food and restaurant budget in order to give your pet care category some wiggle room.
5) Consider Using Cash
Debit and credit cards are extremely convenient, but this can also make it easy to overspend. Consider taking cash out each month to use on nonessential purchases. Handing over cash will make you consider whether the purchase is worthwhile, instead of using a card and forgetting about it. Just make sure to keep a log of all your cash purchases, so you can enter the information into your budget.
Budgets give you control and understanding over your finances. You might be shocked by how much money you’re spending on things you don’t need. It’s good practice to get in the habit of budgeting early on, so you can build up your savings over time.