5 Essential Tips for Creating a Personal Budget
Budgeting is not just about restricting yourself from spending, it’s about empowering yourself with the knowledge and control to make informed financial decisions that align with your goals and values.
Creating a personal budget can sometimes look like an uphill task, like duh.. but it is not that complex if you are down to do it. How? It is simple. This article will simplify the procedure for you in a way that is easy to implement. As we both know, nobody ever dines on a cow by eating it all at go; you eat it bite by bite (that is even if you can finish one cow), even if you are the hungriest fellow on the face of the world. With respect to that analogy, no one expects you to understand budgeting like a pro in one instance. You are allowed to take the process bit by bit. Still with me?
Here are five tips you can use to create your personal budget:
- Make a list of your income and expenses.
- Make use of tools.
- Clear debt
- Build a Habit
- Spend 30% on wants.
What Is a Budget?
Before we probe this further, let’s define the word “budget”. A budget is simply a plan. It’s not a spending limit; it’s a strategy for how you’ll spend your money. It’s a strategy for what’s coming in and leaving your pocket or bank account. You know, something to keep the spending in check.
When you learn to create a budget and stick to it righteously, you give your money a primary goal. You’re taking charge. You’re intentional; goodbye, money worries. Hello, financial objectives and financial management.
Still with me?
Please continue reading to learn how to make it happen and create a budget that works for you.
5 Tips to Make a Budget
You must also decide whether to create your budget on paper, with a spreadsheet, or in an app; numerous apps can assist you with this. In either case, starting by writing everything down on paper is perfectly fine.
Also, before implementing these tips, open an online bank account or obtain your bank statements. This will provide you with the information you require as you begin to fill out the numbers on your budget.
1. Make a List of Your Income and Expenses.
So here is it, Income is any funds you expect to receive during the month; this includes your regular paychecks and any extra money you may earn through a side hustle, sale, freelance work, or other means. You’ve heard the story before. Whether working weekends as a hairdresser or as a Dj? Depending on what you do, that is Income.
Here is what you do, make different income budget lines for each paycheck you receive and any additional income. Note that you’re dealing with net Income here, which you earn after taxes and any other deductions from your paycheck.
If you have infrequent earnings, glance at what you’ve accumulated over the last few months and set aside the minuscule amount as this month’s planned income budget line. If you make more money later in the month, you can adjust and add it to your money goal or another budget line.
2. Make Use of Budgeting Apps.
Not the first time you hear such, I know, but using tools makes everything more manageable; it will help you stay 100% accountable and keep you abreast of your spending situation. One of the multiple benefits of using tools is that most of these apps these days come with extra services that makes budget easier and fun; some even offer unique services like goal setting and money saving. For real, check them out and stop having financial skirmishes every now and then and stay solid.
To make it easier for you, I included about of these tools you can check out:
Achee helps you to manage all your finances on one dashboard. Lots of retail investors are used to using spreadsheets to track the performance of their investments, however, the app wants to replace your spreadsheet.
You can track the performance of your stocks, cryptocurrencies, cash and other fixed-income assets all in one place in your preferred currency and you can see your currency gains on the dashboard.
Piggybank is a free personal finance app based on a traditional saving system. If you can recollect your younger days where you had a designated box, you slipped money in to get something maybe during Christmas or easter or maybe Eid, yeah, that one. Piggybank is an online version of such. This online platform wants to help you recover the saving habit you might have lost while growing up.
Sparkle is a digital ecosystem providing financial, lifestyle, and business support services to Nigerians around the world. Licensed by the Central Bank of Nigeria (CBN), Sparkle is what most people would refer to as a digital bank.
Intuit Mint, also known as Mint, is the money management app that brings together all of your finances. From balances and budgets to financial goals, the platform provides all your money essentials in one place. Mint gives you a more complete picture of your financial health by bringing everything together: account balances, monthly expenses, spending, your free credit score, net worth, and more. You can easily connect your cash, cards, loans, investments, and more to the app.
Inflow is a personal finance management app that allows you to link all your bank accounts in one place, track your spending across expense categories, and create budgets to help you stay on top of your financial game. Inflow is available on the Web, Google Play Store, and Apple App Store.
3. Clear Debt.
First thing first, Hommie, Debts are not cool, yeap, not cool. Bad debts are like anchors weighing down your financial future. They hold you back and prevent you from reaching your full potential. Paying off debts as soon as possible is critical to achieving financial stability and freedom. Accumulation of debt is not a great way of doing things; you stay debt free, reduce financial stress, save money on interest, and improve credit scores.
Assess your financial situation and devise a workable debt-reduction strategy, such as consolidating high-interest debts or prioritizing the highest interest rates. Living within your means, reducing unnecessary expenses, and putting money aside for unexpected expenses can help you avoid accumulating new debt. Debt reduction or elimination allows you to regain control of your finances and work toward your financial goals.
4. Build a Habit.
Having a solid and consistent mindset to achieve your financial goals through a budget is a must, my friend; you must change your mindset toward finance. You have to hold yourself accountable.
Once you are mentally ready, you can start setting goals. Here is how you go about it.
a. Establish a time frame:
Developing new routines can be tricky, but following them for the rest of your life can be challenging.:
You should adhere to your planned budget for two weeks to counter this daunting task. After that, you can set a longer time frame, such as 30 days or six months, until it becomes ingrained in your habit.
b: Gamify it:
If you’re still having trouble, you can try gamifying your budget and turning it into a challenge.
You can set a goal for yourself to achieve. For example, you can say if we save enough money, we can get a new TV or go on vacation.
Examples of gamification include giving yourself a small reward after a certain amount of time or money that you have saved.
5. Spend 30% on Wants.
It can be challenging to distinguish between wants and needs. We know how it feels when you want to get everything you feel you should get; in general, however, needs are necessary for you to live and work. Dinners out, gifts, travel, and entertainment are all typical desires.
It can be challenging to make a decision. Is that date a desire or a necessity? What about fast food? People make different choices.
If you want to get out of debt as soon as possible, your desires can wait until you have some savings, or your debts are under control. However, your budget should not be so tight that you can never buy something just for fun.
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