Budgeting significantly helps in maintaining a healthy financial life and provides for your living expenses.
While it sounds great to have a monthly budget, pay for all your monthly expenses, and have savings, successful budgeting won’t be achieved without a budget plan.
For this reason, you need to have financial literacy and follow a few steps of the budgeting process to improve your personal finances.
If you want to get started with budgeting, which I highly recommend you do, I will explain how you can successfully manage it.
In this article, you’ll find everything you need to know to improve your money management in 4 easy steps.
Benefits of Budgeting
Everybody has financial freedom in life to manage their own financial situations.
But having good spending habits and personal budget style will be worthy because of the benefits they can gain, including the following:
Control Your Spending Limits
If you are wise enough to manage your monthly income, you’ll be able to provide for all your budget categories, including your variable expenses, debt payments, and other essential things.
It’s not easy to ensure you’ll have enough money for everything, mainly because we all have our wants.
But if you have a spending plan, you are less likely to exceed your spending limits or overspend on other things you desire.
Have Extra Money For Unexpected Expenses
With a good spending plan, you’ll be wise about spending your money and saving your extra.
You’ll know what you need most and balance your income.
Many possible events can happen in your life at any time, and they might require spending some money.
So, you have to be ready. When you have extra money, you will have savings that you can use for emergencies.
Achieve Your Financial Goals
Implementing budgeting tips and strategies in your daily life will not only improve your financial situation but also help you achieve your savings goals.
If you have long-term goals you want to save money for, the budgeting process can help you acquire them.
Since you control how you spend your income within your budget period and record your expenses, you’ll have a better chance of fulfilling your goals.
Budget Process You Have to Follow
Even if budgeting can give a better money situation, you won’t maximize its benefits if you are not dedicated and disciplined enough.
You need to be responsible follow the process to be successful.
Here are the steps you need to be strict about if you want to have a great outcome with your spending plan:
Know Your Income
The first step in the budgeting process is knowing how much you actually earn.
You need to determine how much income you have monthly or annually to know how much you spend for your budget categories.
If you have a freelance job and irregular income, you can create an estimate of your total earnings.
Aside from that, you should also add the other sources of money you have, such as your secondary job, remittance, investments, etc.
You need to include them because they are all the money you will use for your actual spending.
Calculate Your Total Expenses
Once You already know how much you earn from your job and your other sources of income, the next thing you have to compute is your total expenses.
Determine how much you need for weekly or monthly groceries, and include all your food expenses, like how much you spend in shopping and restaurants.
You also have to add your apartment rental fee if you don’t own a house. If you have credit card debt, don’t forget about your debt repayment amount.
Remember, you have to include everything you need to spend your money on.
Aside from your necessities, also include your discretionary expenses or the non-essential things you pay for and be honest about them.
Choose a Great Budgeting Style
There are various types of budget plans that many people find helpful in their personal financial lives.
Their effectiveness will depend on what’s most suitable for your financial situation and what your purposes are.
So, you have to learn some of the most widely-used ones and choose based on what you find convenient and effective for you.
Below are some of the common styles that might work well for your situation:
The 50-30-20 Method
This budgeting method is one of the famous ones that are used for personal finances.
This technique is simple yet requires strictness to avoid overspending.
Basically, 50 means 50% of your total income will go to all your necessities, including food, house, education, debts, and more.
The number 30 stands for 30% of your total money budget that will go to your desires or discretionary expenses like travel fees, new gadgets, or other non-essential objects you want.
Lastly, the remaining 20 means 20% of your income dedicated to your savings for your emergency fund or future plans.
If you need more percentage of your earnings to go to your basic needs or need more for your savings, you can always adjust the ratio as long as it works for you.
Envelope Budgeting
Some of the traditional budgeting styles you can try out if envelope budgeting.
It is simple but can be effective for you.
You just need to separate your total income in cash in different envelopes.
Each of your budget categories will have a separate amount of money put in an individual envelope.
When you run out of money in one envelope for your unessential spending, you can’t spend on that thing anymore.
But if you become short in cash on one necessary budget category, you’ll have to make adjustments in the non-essential ones.
However, you have to be disciplined to control your spending if you want this method to be effective.
Budgeting App
If you want to create automated budgeting for more convenience, you can use one from different budgeting apps like the NYAB app, which you can use for overall budgeting types.
Besides that, if you live with an intimate partner or already have your own family, you can try the Zeta app.
To ensure that the app will benefit you, you must check what budgeting style it uses and if it’s appropriate to the method you want.
Once you have successfully downloaded one, you just have to sign up and input your data, such as your total income, expenses, and other budgeting-related information.
Commit Yourself to Your Chosen Method
When you choose what budgeting method works best for you, you must accept the responsibilities and commit yourself to that method.
Otherwise, it won’t give you the better financial life you are trying to achieve.
If you think that budgeting might be challenging due to your spending habits, try to adjust, especially on unnecessary things you are spending.
It might not be that easy if you are used to making your current spending habits.
But just think of what you can achieve if you dedicate yourself to what you do.
All your strengths and efforts in trying to control your spending will result in a desirable outcome.
Conclusion
Financial management is essential if you have future goals and want to make a healthy financial living.
However, it’s also not simply achieved without the proper knowledge and a great sense of responsibility.
You need to be knowledgeable and willing to follow the budgeting process you will pick if you want the budgeting style to be effective.
If you are willing enough, having successful budgeting won’t be an impossible mission.
So, do your best to find the budgeting style you need and follow the process to be successful.
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