Financial Education

How to start budgeting: 5 best tips

Are you struggling to make the most of your money? This article will guide you on how to start budgeting and create a good financial plan for your future. Let’s go!

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The best way to manage your finances: learn how to budget

budgeting
Learn how to start budgeting! Source: FreePik

Are you tired of watching your hard-earned money fly out the window? So it is time for you to take control of your finances and start budgeting!

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Budgeting can initially seem daunting, but it’s not as complicated as it looks. In this post, we’ll give you five tips for getting started. So read on and get ready to take charge of your money!

Why is budgeting important for your finances?

budgeting
5 easy budgeting steps for beginners! Source: FreePik

The secret to saving money is understanding how you spend it. Budgeting will help keep your money on track and lead you toward your financial goals.

To stay on top of your finances, you need to have a document that will help you monitor your income and expenses: a budget!

In other words, it is a plan to make you spend less than you earn each month. Budgeting also allows you to scheme how much money you will save and spend in a certain period.

Budgeting is essential for several reasons. First, it helps you to understand your relationship with money. Also, it is a great way to stay out of debt.

Equally important, a reasonable budget will help you save money for the future, preventing you from a future financial crisis. 

Managing your financial decisions will prepare you for unexpected challenges.

You can start your budgets by writing by hand, using spreadsheets or budgeting apps, but remember there is no correct way to do it.

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Get started with budgeting today: 5 easy steps for beginners

budgeting
Get started with budgeting today! Source: FreePik

Creating a budget that works for you is essential. A personalized budget will help track your spending habits and guide all that hard-earned cash in a way that makes sense!

Now that you fully understand budgeting and its importance, let’s get started! Jump in and read the best tips to start budgeting yourself.

Determine your main goals

First, you must find out why you want to start budgeting. Before starting any process, set a clear objective. It will determine the financial choices you’ll make.

For instance, people can start budgeting for several reasons:

  • Avoiding or getting out of debt;
  • Ensuring your spending matches your goals;
  • Saving more of your money;
  • Achieving long-term financial stability.

Believe it or not, when you’ve set your motivation, the process of organizing finances will become much more fluid, and soon you’ll start seeing results.

Get your financial statements together

One of the keys to budgeting is having knowledge and access to all the information about your income and expenses.

Dig deep into your current spending habits to make make your budget realistic.

Therefore, you’ll need your financial statements, such as investment accounts, card bills, receipts from the past three months, later utility bills, and more: the more information, the better.

Measure your full income

To make the best use of your money, you must know the total amount you make monthly. Isn’t it?

So if you have a regular paycheck in which taxes are deducted, use your net income to base your budget. For self-employed people, make sure you have detailed notes of everything.

If you have irregular income, you can set your budget by considering the month you had lowest-earning in the past year.

Remember to consider other sources, too, such as Social Security and child support. Once you have it all together, record it as a monthly amount.

Track your monthly expenses

The next step after knowing how much money you have is to figure out where it’s going! By doing that, you can determine your spending and savings easier. 

Start by writing down a list of all your monthly fixed expenses, such as rent or mortgage payments and insurance. Then add your variable expenses: groceries, utilities, and entertainment.

Take notes on your daily expenses too. Once you find out where your money is going, you can quickly reduce overspending.

Make a budgeting plan

Now that you have all the information put it together and start planning. The main goal is to get a sense of your spending in the coming months.

Use your variable and fixed expenses compiled so far, and compare them to your total income. If your income is higher than your expenses, congratulations! It’s a great start.

However, if your expenses exceed your income, you are overspending! The good news is that you can start taking control of your finances immediately by budgeting.

One highly recommended plan for those on top of their finance is the “50-30-20” budgeting philosophy. It is divided into three basic categories:

  • 50% of your income is dedicated to your needs or fundamental expenses;
  • 30%  to wants, such as trips and entertainment;
  • 20% are dedicated to savings and debt repayment.

In case of overspending, it may be necessary to adjust your spending to stay on budget.

For example, instead of dining out, make dinner at home. So you can lower your spending on “wants” and adjust on “needs” if necessary.

You’re ready to start budgeting!

Once your budget is set, remember to review it regularly. Anything is set in stone, so your expenses might change! Keep it updated and make sure it is working correctly.

So there you have it, the basics of budgeting for beginners. Now that you understand the importance of budgeting and some tips on getting started, it’s time to take action.

Start by creating a budgeting plan personalized for your needs and goals.

With a little effort, you can achieve financial success while keeping your stress levels in check! Ready to get started? We hope so!

Also, if you want to learn about how to save money and stay away from abusive bank fees, read our post below to learn all about how they work and the most common ones!

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About the author  /  Beatriz Vieira

Beatriz Vieira is a producer and copywriter who is part of the finance writer team in this portal. She has a degree in Journalism and aims to improve her bilingual writing skills. Her subjects of most significant interest are culture, finances, and self-development.

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