“Budget” can be a scary word for a lot of people. It often reflects limitation and lack of opportunities. Many people think that determining a budget and allocating personal finances strategically puts them in a confined box.
The truth is, determining a plan for your income is the best way to make the most of your money. You will be able to save more money for the things that bring you joy rather than barely catching up with your monthly bills. By planning out your spending, you can better achieve financial freedom and a less stressful life!
The way to do this is to come up with a plan for every dollar you earn. By this, I mean calculate all of your expenses and subtract them from your monthly net income. If there are any elective expenses that you can eliminate, do it! I find that once I write a list down and calculate the total amount being spent each month, it’s a lot easier to narrow down and cut out unnecessary expenses. I should also add that I include paying myself in my expense column. This money goes directly into investment accounts that I do not access. You know, planning for retirement or whatever! I also calculate planned vacation expenses into this total as well. If you don’t plan it ahead of time, the cost of going on a vacation can seem impossible. Don’t let this happen. Everyone needs a vacation!
After you subtract all expenses from your monthly net income, you will find out exactly how much you have left over. Whatever is left, allow yourself some fun money. Everyone needs some spending cash. Whether your budget allows $100 per month of $1000 per month, stick to that. And lastly, the remaining funds should be stored in a separate savings account. I like to think of this account as my usable reserves. If an emergency were to arise, those funds are available, but they’re not as easy to access.
Here are some quick tips on how to keep your budget on track:
- Pay yourself first. Even if it seems impossible, make it a habit to put money away for your future. You are the most important thing to spend your money on. Invest in yourself and you will grow!
- Withdraw grocery money and fun money in cash. Keep each amounts separate, and stick to the allocated amounts. You’ll notice you spend that money slower when it is in physical form rather than swiping a card.
- Cut out unnecessary expenses. If you’re still paying for that gym membership but haven’t visited in over a year, maybe consider cancelling (or better yet, just go to the dang gym!).
- Live below your means. Just because you can afford it doesn’t mean that you have to buy it. By living below your means, you will experience more financial freedom and a much more stress-free way of living.