The best ways to make a budget and getting the most savings you possibly can is working out an effective budget plan. There may be a lot of tips and strategies from different sites, but all of that will be worthless if you are not budgeting the right way. Here are some simple steps you can follow to keep track of your budget:
4 Simple Steps in Making a Budget Plan
Let’s go down to the basics. You can never go wrong if you follow these simple steps to make a budget plan:
1. Record all your income
Take note of all your sources of money so you can have a clear grasp of what you can spend. Add up your salary, pension, income from investments, as well as government benefits and more. You can do this on a daily, weekly, or monthly basis depending on what suits you best.
2. Total all your needs and expected expenses
There are some expenses which you would have to pay for regularly. These are fixed expenses, and you can take a look back at your recent month’s expenses to get a range of how much you pay for these. It includes rent, bills for phone, gas, electricity and the like, council rates, household expenses such as food and grocery, transportation allowance, medical costs such as insurance, and family costs like school, child care and such.
Also, add any debt you will need to pay for such as loans, mortgage, and credit cards. Do not forget to put in some funds for emergency needs such as repairs and other extra costs in school, home, pet, etc.
3. Save and set financial goals
You can try to cut back on spending on things that are not in the ‘needs’ list. Look at all the extra money from your budget and aim to save that much. Allowing yourself to save as much also helps avoid problems when unexpected expenses arise.
4. Limit your spending
What is left after settling all the bills and expenses are for your leisure and entertainment. Try to put a limit on the amount you can only spend on all these wants, so you do not end up spending so much against temptations.
Other Tips on Budgeting
Now that you are through with these four easy steps for budgeting, here are some things you can keep in mind to ensure that your budget plan will work:
Always review your budget plan
Make sure you take a look at your budget plan and expenses regularly to check if things went according to plan, or if there are areas you can still improve on.
Manage your bank accounts
It is recommended to have separate bank accounts for each of your needs. For example, have a different account for your savings with high interest and another one for your spending.
When in doubt, follow the 50-30-20 rule
If you doubt the allocation of your finances, most people follow this rule: 50% of your money goes to your daily needs, 30% is for wants, while 20% is for savings. Of course, it would all depend on your needs and resources, so careful budget planning is really important.
Making a budget may be challenging at first as it might mean changing the lifestyle you’re used to. In the long run, however, you will reap bigger and more gratifying benefits.