6 Budgeting Tips For Beginners In The New Year
A good goal to work toward in the new year is getting better with your finances. A great place to start is creating a monthly budget. Figuring out how much you make, how much you can spend and how much you should save monthly will help you when cultivating your money management skills.
If you’re just getting started working toward better money habits, read on for some beginner tips and budgeting methods you can implement in your everyday life and tailor to your personal lifestyle to achieve financial success.
How to Start Budgeting For Beginners
Budgeting can be overwhelming, especially if you’ve never done it before. It’s important to hone in on the basics and sort out your priorities. Start by taking into account necessary expenses such as rent, utilities, car payments, student loans, groceries, etc. It’s important to also take into consideration further expenses like wants and other variable items, such as: clothing, entertainment, eating out, etc.
Creating a successful budget is really all about prioritizing your essential expenses, deciding on what’s really important to your lifestyle and then calculating how much money you need each month to live comfortably and afford those things.
Step #1: Record monthly income
The most important step when it comes to creating a budget is figuring out how much money you’re actually making. Record the exact amount of money or net pay coming in each month and keep track of that. This can be simple if you have a single, fixed paycheck with taxes already deducted, but can get a bit more complicated if your income is variable. Just be sure to list the exact amount of take-home pay you’re receiving after taxes.
Step #2: List fixed expenses
The next step in your budget should be listing fixed expenses. These are expenses that are easy to track because you’re typically paying the same amount each month, such as rent, student loans, or car payments. Be sure to prioritize these expenses because most of them (if not all) need to be paid by a certain date or you’ll risk paying late fees, which will take away from your overall monthly budget.
Step #3: Consider variable expenses
Some of your monthly expenses will vary and fluctuate from month to month. These expenses are called variable expenses. Some examples of variable expenses are your utility bills, gas, groceries, toiletries, credit card bills, car maintenance, haircuts, new clothes, entertainment expenses (such as going to a movie or eating out) and more. It’s important to incorporate these into your budget and set aside designated money for such things in your monthly plan.
Step #4: Consider your wants
While the majority of your monthly budget should prioritize your needs and essential expenses, it’s important to set aside money for wants and prioritize yourself as well. Consider your wants when creating your monthly budget. Is there a new skincare product you’ve been dying to try and want to purchase? Have you been saving for a new bag or pair of shoes and finally want to make the splurge? Is a new movie coming out that you want to go see? Is a holiday coming up and you’re planning on spending more money on groceries to try new recipes? These are all valid expenses and you should definitely treat yourself if you have the means to do so! Take some of the money set aside in your budget for these expenses and do something fun for yourself.
Step #5: Cut back
While treating yourself is definitely something you should do from time to time, some months may be more frugal than others. If you know you have larger sum purchases coming up or you’re saving for something big, like a vacation or new car, you’ll need to cut back on variable expenses and put more aside and into savings. This may seem like a drag at the time, but making those smaller sacrifices—cutting back on eating out or going out to drinks with friends—will pay off and be extremely rewarding in the end.
Step #6: Set goals
Improving your financial success is all about being smart with your money and setting goals. Being intuitive with your spending and working toward financial goals is what budgeting is all about. Are you wanting to pay off your student loans by a certain date? Do you want to have a certain amount in your savings in five years? Are you thinking about purchasing a car or a house? Making a budget and sticking to it will help you achieve those goals and help you flourish financially.
Now that you’ve read some budgeting tips for beginners, you can begin to sort out your expenses and get to making a budget curated for you and your lifestyle. It’s important to remember that budgets don’t always work in the same way for everyone and you might have to make some tweaks to find the perfect money management plan that works for you! Happy budgeting!