Budgeting for Beginners

Have you ever found yourself with a pile of bills to pay and almost no money to pay them? Most of us have hit financial rock bottom at some point in or lives. In a perfect world, everyone would get paid enough for the hours they work without having to worry about whether or not they’re going to be able to pay rent, utility bills, transportation, health insurance, food, student loans, etc. etc, but alas we do not live in a perfect world. Until then, we might as well master the essential art of budgeting.

Budgeting is crucial in obtaining financial success. It’s important to always be aware of which areas you’re allocating money to. Here are some tips to get started on balancing your budget,

• Analyze your Current Spending Habits

As with any goal, a good starting point can be to reflect on what it is about your current state of being you’d like to change. What are you spending your money on? You can take note of this by viewing your bank statements and recording each of your purchases in a spreadsheet or notebook. You could even use an app such as Mint or Expensify to help you stay on track. It’s recommended to spend about 30 days tracking your spending to get the most accurate picture of your habits.

• Analyze your Income

How much money are you making per month? How many streams of income do you have? The next step in budgeting is to figure out what you’re working with. If the amount of money you make month-to-month varies, decide what the absolute lowest amount of money you might make per month and use that to base your budget around. It’s best to prepare for the worst of times, plus if you end up making more money you’ll have extra in case of an especially bad month.

• Decide What Type of Budget will Work for You

If you’re a budgeting beginner, the 50-30-20 budget may be a good rule of thumb:

1. 50% of your monthly income goes toward your needs (food, rent, debts, etc.)
2. 30% of your monthly budget goes toward things you want (entertainment, vacations, nights out, etc.)
3. 20% of your budget goes toward your savings.

If you think this method won’t work for you, there are many other types of budgeting methods. You can read more about them here. 

Budgeting is an acquired skill, and you may be bound to make a few mistakes in the beginning (like these). However, once you start getting into the groove of budgeting, your finances will soar, and you’ll feel at least a little more financially comfortable. 

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