Creating your first budget can be a little terrifying. Like many, you may not know exactly how you spend all your money other than your monthly payments for housing, your car, and your regular monthly bills.
The best way to start is to track your monthly spending. Include all your spending including little things such as that daily coffee at Starbucks or Tim’s, lunch treats, and magazines. You should track your spending for at least a month as you are on the go everyday at home, at work, and at play.
Here are a few tips to help in your monthly budget and get you on the right course.
Set A Saving Goal
Put into writing your short-term, medium-term, and long-term goals based on your needs, wants in life. You need to be realistic in your monthly budget about what you want, need, and can achieve based on real income that you have.
Once you have set your goals, you can figure out how to achieve with your income and expenses. You may need to rethink some of your spending patterns, pay down more debt,or even make a lifestyle change so you can achieve your goals. Don’t forget life can always change, so be prepared to re-evaluate your budget as time goes by.
Develop a Savings Plan
Every personal budget should include a plan for savings. The creation of a monthly budget can help with increased savings, as you get a better understanding of your spending habits and how to better manage them.
If you are short on savings, the first priority should be to start an emergency fund to cover three to six months worth of expenses. This can aid with unforeseen events such as a job loss, the emergency fund will provide breathing space for weathering any unforeseen circumstances.
Start Paying Yourself First
As part of your budget, you should also plan to save for the future. Paying yourself first by setting up a program for regular savings with funds solely devoted to meeting your financial and life goals.
Each time you receive your pay cheque, take a percentage of it and put that money in your savings account. Your bank can help by setting up an automatic withdrawal to take money out of one account and put it into another account every time you get paid. Think of it as auto pilot. Generally if employed, try to save from 10 to 15 percent of net income. If unemployed, try to save two to three percent of net income.
Sure, a budget involves a bit of work on your part, but the payoff is financial discipline and peace of mind. Once you get the hang of it, budgeting is easy and can mean a better financial future for yourself and your loved ones.