Creating a Budget
What is a budget, and why do I need one?
There are so many different things to keep track of when it comes to your finances. Food, gas, housing, debt, medical bills, insurance, and countless other bills pile up every month. A budget is a way for you to track better what you are spending your money on and manage how much money you are spending.
How do I get started?
Use a Budgeting Framework
A great place to get started is utilizing a so-called "Budgeting Framework." The 50/30/20 rule, as laid out by NerdWallet, breaks down your spending into three main categories: needs (50%), wants (30%), and savings (20%). This framework is an excellent place to start, and you can modify it to fit your individual needs.
How do I stick to it?
Check-In Regularly
A budget doesn't do much good if you aren't regularly comparing your budget to your actual spending. Set aside a time each week to evaluate your spending and whether you need to adjust your spending patterns moving forward.
Automate Your Savings
Deciding to put money away can be difficult, especially when you could use it for something right now. Savings is a lot easier, however, when you never see that money in the first place. Setting up automated saving rules whenever you make a deposit can make saving easier and lessen the temptation to spend that money.
Utilize Multiple Accounts
When it comes to budgeting effectively, being organized is vital to success. While very much optional, it may be helpful to have separate checking accounts for your "wants" and your "needs" categories. Suppose you always have enough money to cover your bills going into your "needs" account. In that case, you never have to worry about spending too much money in your "wants" account.
Make Changes
Ultimately, a budget is a tool that is supposed to make your life easier. If you find that you are having trouble keeping up with it, or your budget isn't working the way you thought it would, make changes. Your budget can evolve until it's easy to manage.