The average American with debt owes around $26,621, which shows many of us struggle to budget.
Creating a budget feels overwhelming because it’s difficult to make sacrifices, whether it’s not dining in restaurants or going to the movies with friends. But there are ways you can continue living your best life without breaking the bank. Perhaps you’re struggling to create a budgeting strategy, and you’re looking for inspiration.
Sounds like you? Don’t worry; you’ve come to the right place. Here is everything you need to know.
Calculate Your Monthly Income
If your goal is to get an 800 credit score, then creating an ironclad budgeting strategy is crucial. The first step in calculating your monthly income, so you know what you’re working with. Focus on your main source of income rather than side hustles because they could fluctuate.
Consider Your Financial Goals
Before starting the budgeting process, consider your financial goals. Perhaps you’re trying to pay back debt or save up for an expensive piece of furniture. Further, be honest about your current spending as you may notice a huge spike in unnecessary purchases like clothes or eating out.
Then, once you’ve designed a smart budget plan, it’ll be easier to funnel funds into the areas you want, whether it’s building an emergency fund or investing in your side hustle.
List Your Expenses
In your financial management plan, it’s important to list your expenses. This includes the main four: food, utilities, rent or mortgage, and transport. Note that your eating habits, energy bills, and the amount of gas you need will fluctuate every month so calculate an average.
Then, subtract these from your monthly budget, so you know what else is left. Note, if you’re in debt, then dedicate a chunk, so you don’t accumulate bank fees. Once you’ve done that, then you will have a sum that you can use for entertainment and hobbies.
Try the 50/30/20 Rule
Professionals in the financial industry are familiar with the 50/30/20 rule because it’s so effective. This is where you divide your money into three separate piles. There’s 50% for needs, 30% towards wants, and 20% for your savings. The key is to keep these separate, so you don’t dip into your emergency fund for non-urgent items like new pants.
Track Your Spending
A top money management tip is to consistently track your spending. You can use the old-school way of using spreadsheets or downloading the best free budgeting app on your phone. The most popular ones include Mint, Goodbudget, and PocketGuard.
Further, create a new budget every month so you can accommodate special occasions like birthdays.
Create a Budgeting Strategy Today
Hopefully, after reading this article, you’ll create a robust budgeting strategy.
Start by calculating your monthly income, factor in your financial goals, and list your expenses. You should also follow the 50/30/20 rule and track your spending, so you stay on top of things. Good luck!
Found this article helpful? If yes, then check out the rest of our blog for more tips.