Take Control Of Your Money: The Ultimate Budgeting Guide For Beginners

Introduction: Imagine you got a job of a certain salary, now will you spend the whole month salary on a single bill/procuring luxurious items? Probably not right. The most obvious thing you will do is first take a note of all the possible expenses you need to incur for living like food, electricity, and other basic requirements, following that you will keep the remaining portion as savings. This whole process is popularly known as budgeting. Many people struggle doing this and face harsh consequences because of their approach to finances. This beginner’s guide will help you to understand the basics of budgeting, enabling you to manage the finances efficiently, and make your financial journey smoother in the future.

What is Budgeting? The way of allocating funds as per the expenses, and then saving for the future, is called budgeting. Let’s understand how this can help you make informed decisions:

1)Track your spending- You can list all your expenses in a piece of paper, and can see where is the biggest portion of the salary going. By doing this, you can reduce unnecessary expenses.

2)Save for goals- A foreign trip after 10 years, early retirement at 40, can be examples for goals. The preferences of goals vary from person to person, number of goals is exhaustive in nature.

3)Avoid Debt- After doing the budgeting process, you will have a clear idea about your savings and expenses, which will help you to not impulsively buy of a product based on mere temporary satisfaction. This will help in avoiding the most dangerous element of personal finance, debt.

How to create a simple budget? Its not hard as you might think. The steps mentioned below can help you to create a budget-

1)Track Your Income: Write all your sources of income, like your salary, passive income(if any), etc. This will help you to know how much you are getting every month in your bank account.

2)List your expenses: Make a list of all the necessary expenses, you need to pay for in a month, it can be:

a)Fixed Expenses(Example- Rent, Utilities, Insurance)

b)Variable Expenses(Example- Groceries, Gas, Entertainment)

c)Savings Goals(Example- Emergency Fund, Retirement)

3)Categorize and Prioritize- Dividing the expenses will help you to utilize the funds for the most important expense among the others. If you take an example-Eating out might be an expense of lesser significance than your child’s expensive tuition.

4)Set Spending Limits- Knowing how much you earn and spending will enable you to set limits for unnecessary spending. Helping you to follow your budget in a meticulous manner.

5)Review and Adjust- Like in life, nothing is constant, your budget is definitely not an exception. Always check what needs to be changed by reviewing it on a regular basis. This will help you reach your financial goals.

Tips for Sticking to your budget

a) Use Budgeting Apps: Many apps are available that will prove to be helpful to you for tracking your income and expenses, which in turn will help you in budgeting. Examples of app can be Mint, YNAB(You need a budget),etc.

b) Be realistic: Don’t spend or save either too much or too little. Who knows when one requires some extra money. So keep some more money to meet unexpected events.

c) Start Small: Your full salary might be a hassle to manage for you, so start with a small balance, for at least a week. After doing this for some time, you will feel comfortable to increase the balance up by a bit.

Conclusion: Budgeting is something which teaches about how to manage our money, so that it does not get wasted for our unnecessary desires. Tracking our expenses and saving in a disciplined manner can help us achieve our financial goal in the future, and also avoid debt. It doesn’t have to be perfect, being consistent can do the job. So what are you waiting for? List your income and expenses and start budgeting from today!

Takeaway:

a) Track your income and expenses: Know your source of income and expense.

b) Set realistic limits: Saving and spending should be done very systematically keeping in mind the financial goals.

c) Review Regularly: Changing the budget when required, as per change in income and expenses.