No matter how much money you make, knowing how to manage your finances is an invaluable skill. Sure, some need to be more careful with their spending than others, but that doesn’t change the fact that everyone should be acutely aware of what they’re doing with their cash. We don’t say this to scare you, though. Instead, get excited! Taking control of your money is something that helps you both immediately and for life.
Make a real, physical budget
A lot of us have loose budgets in our heads that we stick to when it’s convenient, but it’s easy to get sidetracked. Sure, going out to dinner instead of cooking would be a lot more fun; but will you still have enough for the water bill? Writing out your budget takes out all the guessing from the equation and will leave you feeling confident about all of your purchases. It might sound obvious, but it’s a huge step towards financial control.
The best way to go about making your budget is to make one for each month. Start with how much money you’ll earn in a month. If you’re someone without a super-stable source of income, try to make an average of the past few months. After that, write down all the bills that you’ll be expecting and how much you’ll be paying for each. From here, you can start to figure out budget percentages that indicate how much money you want to be going where. If you’re spending 25% of your monthly income on housing and another 10% on bills, you can allocate 10% for groceries, 10% for gas, 10% for savings, and so on. The categories and percentages are up to you, but be realistic and fair.
While using an app or a spreadsheet is a great start, it doesn’t hurt to put pen to paper when it comes to money. Actually writing out your budget will help you internalize it more. You can even make sitting down at your financial notebook a ritual that you’re sure to never miss.
Record what you spend
Once you have a concrete budget sent out, it’s time to hold yourself accountable. Writing down what you spend will make sure you’re sticking to your budget, and it might make you think twice about frivolous spending. Recording what you spend is also an excellent way to try to figure out a budget that works for you. If you find that you’re often spending 15% of your income on gas, rather than the 10% you allocated for yourself, you can go back in and edit your budget by subtracting 5% from a different category. Recording your spending will ultimately make you wiser about where your money is going, so get to it!
Hey, you expected to make $5000 this month, but instead, you ended up with $6000. Awesome! That’s another $1000 that you can toss into the “fun” section of your budget, right? Well, sure, but we don’t recommend it. The point of having a budget is knowing how much money you need to get by comfortably every month. If you end up with more than you expected, you’ve already established that you don’t need it. The best thing to do with it is to put it away, either in your savings, an emergency fund or towards your retirement. It’s wise to have savings built into your budget, to begin with, as well.
Make goals and work towards them
Financial goals will vary from person to person, but knowing what they are will greatly influence your budgeting and your spending. Say you’re a recent graduate working off what seems like an endless amount of loans. Set a year that you want to be paid off and work into your monthly budget an amount that is both fair to you and fair to your goal of being debt-free. Other goals can include retirement or a certain amount of wealth, which might change how much you save every month.
By consciously selecting these goals, we can train ourselves to have something to work towards, which will make the act of budgeting seem all the more meaningful. Your goals are goals for a reason, so take them seriously and get where you want to be.
Money can be a stressful subject, but it doesn’t have to be. By setting goals and rules for yourself, you’ll start controlling your finances, rather than the other way around. Just remember: it’s a constant learning process, so don’t get discouraged if there’s a slip-up or two along the way.