Budgeting is the little plan in 2019 that will keep you financially organized and stress-free. However, to make an accurate budget you must have a clear picture of what your goals are.
For example, aside from paying bills this year, you will also like to travel and buy a home. Both are achievable but will take some discipline in your part.
Before you start, go through find ways to reduce your bills.
Reduce Your Bills
We can thank the internet for making research and price comparison a lot easier. Basically, your first job is to review how to lower your main bills. You should try to reduce your car insurance, phone bill and internet payment. Take around 2 to 3 days to make accurate research and try not to fall for hidden fees.
Second, make a list of any additional expenses you have. These expenses are your wants. They will probably include coffee trips, friend dinners, splurge shopping and any expense you simply do not need to do. Minimalism is key when it comes to sticking your budget. After you have written these out find a way to cut them by 80%. Start making coffee at home and have a home-made breakfast with your friends instead.
Your budget will be divided in 3 parts. Your goals, emergency fund and everyday living.
Set aside 5% of your income after taxes and make this number your emergency fund goal. You will not touch this money unless you absolutely need too.
Then write down every expense you have. Starting with your groceries and ending with your favorite leisure expense.
If your end result shows more income than expenses, you are off to a good start. This means you can prioritize this excess to areas of your budget such as traveling and retiring. If you are showing a higher expense column than income, it means some changes will have to be made.
Make adjustments to expenses.
If you have accurately identified and listed all of your expenses, the ultimate goal would be to have your income and expense columns to be equal. This means all of your income is accounted for and budgeted for a specific expense or savings goal.
If you’re in a situation where expenses are higher than income, you should look at your “wants” to find areas to cut. Since these expenses are typically non-essential, it should be easy to shave a few dollars in a few areas to bring you closer to your income.
Review Your Budget Monthly
It’s important to review your budget on a regular basis to make sure you’re staying on track. After the first month take a minute to sit down and compare the actual expenses versus what you had created in the budget. This will show you where you did well and where you may need to improve.
Most importantly, keep yourself organize. A budget only works if you are willing to follow it and put in the work.