"The information provided on this blog is for general informational purposes only. It is not intended as professional financial advice. Please consult a professional before making any major financial decisions".
Let's face it, budgeting is hard. No one wants to stick to a budget, you work hard at your job and want some indulgence. The key is to find a balance, so you can have fun but also plan for the future.
Track Spending:
The first thing to do is look at your total income, this can be from your job, side hustle, or parent contributions. Next up is to add up all expenses, both big and small. Everything from rent and car payments to subscriptions; this way you can get the full picture. This may be time-consuming at first but is worth it in the long run.
Generally, your expenses can be summed into 2 categories, fixed and variable. Fixed expenses tend to stay the same and usually include rent, car payments, phone bills, etc... Variable expenses are harder to track as they are constantly changing; variable expenses may include groceries, dining out, entertainment, etc... On the bright side, these are the ones you can control.
Next is to calculate everything: Are you spending more than you are making, or are you spending less than you are making. If it's the former, you will eventually go into debt. If it's the latter, you shouldn't look at new ways to spend money. Instead, you should add it to your savings or consider paying off any pre-existing debt. If you are spending more than you are making, you need to work towards either making more money or cutting down spending.
Managing Expenses:
Look at everything you spend. Where could you cut down? Note that this isn't easy, but it is necessary. Focus mainly on variable expenses as you have the most control over those. Remember, small expenses add up. A 5$ latte every day is equivalent to nearly 2000$ a year, and that is just one expense! Some ways you could cut down are by making coffee at home or packing a home lunch. A few more things you could cut down on are subscriptions, dining out, or shopping.
Set Realistic Goals:
The whole point of a budget is to help you meet your financial goals. Set short, medium, and long-term goals. Prioritize paying off debt. Some examples are:
Short-term (0-6 months): Building an emergency fund or paying off high-interest debt.
Medium-term (6 - 18 months): Contribute to a retirement fund or save for a home.
Long-term ( 2+ years): Be debt-free, and pay off the mortgage.
Your goals should be specific as vague goals make them harder to budget for.
Maintain your budget:
You should spend a couple of hours each week to track everything and make sure you are maintaining your budget. There are several free apps to help you track and maintain your expenses such as Mint, YNAB(You Need A Budget), and PocketGuard. If one budgeting app doesn't work, don't give up -- try a different one. Lastly, remember that budgets aren't intended to stay the same forever, and should change as you get closer to your financial goals. Good Luck!
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