Not operating on a budget? You may find that while you’re intending to save part of your income every week or month, something ‘always comes up.’ If this sounds familiar, you need probably to create a budget.
If you’re shaking your head in horror, relax. A budget doesn’t have to be confining. In fact, you can actually feel like you have more freedom with a budget since you’ll be able to relax when you do spend money on fun things. When you’ve already put some money in savings, you won’t be feeling guilty when you go out for drinks or dinner.
Here’s how to create a budget that works for you:
Monitor your spending
Before you begin budgeting, you need to find out exactly where your money is going. Take one month to write down every cent you spend. You can easily automate this by using one of the many financial apps on the market (Mint is a good one), and then break down where you’re spending unnecessarily.
If you get a latte from Starbucks once a day, you could cut this down to three times a week, and use the remainder to go out for a nice dinner. It’s easy to spend money without thinking, and small amounts tend to add up quickly.
Set up smart goals
Many people are living from paycheck to paycheck. Unfortunately, if the car breaks down or you have another calamity, this can mean that you have no way to pay for both the problem and your living expenses. While this can happen to anyone, and services like 24Cash have been designed for these types of emergencies, no one needs this kind of stress. Your first goal should be to have at least a few months of savings tucked away in case of an emergency.
Next, think about paying off debt and gaining financial security. This could mean setting up a retirement fund or even purchasing a house.
Divide your income
Before you begin spending your wages or salary, divide it up. First, pay any bills and living expenses like rent, utilities, and credit card payments. Then, take 15-30% (feel free to start small and work your way up), and put it straight in your savings. The remaining money is yours to play with- whether that means spending it all on clothes or going out for a few nice meals.