A Complete Guide to Building a Budget

A Complete Guide to Building a Budget

Building a budget is much harder than it seems. You’re always told by those around you to go online and find a budget technique that sounds straightforward. But what you are not told about is the trial and error that comes with this. Yes, the internet is filled with millions of unique techniques, and yes, one will suit your needs. However, before diving headfirst into the endless options, we advise clamping down and analysing your finances to ensure you get a head start on finding the correct technique for you. When you begin to understand your finances, you will soon gain some understanding of what works for you and what doesn’t, making your budgeting journey much smoother and more successful.

Embrace Self-Awareness

As we mentioned above, self-awareness is essential. It’s important to give yourself some time to reflect before you begin calculating and navigating the budgeting world. To determine your total monthly income, gather your paychecks, bank statements, and any other sources of money to evaluate your current financial situation. While reviewing this information, you should make a detailed record of every penny you spend, including essential shopping items, rent, entertainment, and subscriptions. This will help you find any downfalls or unexpected payments in your spending. Once you’ve gained all the necessary information, you can try creating some short and long term financial goals. These will keep you motivated and allow you to see an end, no matter how close or far it may be.

Starting Simple

The internet is filled with overly complex spending and saving techniques. As beneficial as some of them are, when you’re starting, it’s best to start simple; otherwise, you could get confused and demotivated. One budgeting method we suggest is the 50/30/20 rule. This rule was popularised by Senator Elizabeth Warren and helps manage your income by dividing it into three key categories, including essentials, wants, and savings. In other words, 50% of your income will cover your must-haves like rent, utilities, food, basic transportation, essential bills, and minimum debt payments. The following 30% can be used for fun stuff, like treating yourself, whether this be through dining out, taking a holiday, or any other non-essential spending. Finally, the remaining 20% is to invest in your future by building an emergency fund or paying off unimportant debts. This simple rule split ensures you cover your bases.

Once you have mastered the basics, you can then start switching things up and becoming more flexible.

Sticking to the Budget

Sticking to a budget is something that most people struggle with, especially at the beginning of their journey. It’s common for individuals to just jump in head first, which soon leads to burnout. To stick to your budget, there have to be a few incentives in place. These could include milestone celebrations or perhaps support from those around you.

Not only this, but budgeting also doesn’t have to be overly complicated. If you’re too busy to do everything independently, many banking apps now offer in-app changes. These will allow you to automate payments and find alternatives to help you stick on the right path.

Embrace the Journey

Budgeting is a journey, not a destination. Once you hit one milestone, you’ll soon create another goal. For many people, the creation of savings and an emergency fund is essential. After all, we never know what unexpected financial issues may occur or how unprepared we may be without a strong budget. If you’re searching for a quick fix during a financial emergency, payday loans can help. Learn more here.