Learn How to Make a Budget for That Vacation You Want
In a perfect world, we’d all be financially stable and wouldn’t have to do mental math or look at price tags while spending money. Alas, we live in a timeline where currently most of the money in the world belongs to the one percent and the rest struggle with an income that never seems to spread far enough each month. But who wants to set aside time to look over all of their expenses and allocate each dollar to a certain category? (About 1 out of 3 Americans do and live by a strict budget.)
Why Are You Making a Budget?
A budget is a plan on how you will be spending your money and helps you develop good spending habits and use money responsibly. The first step to creating a budget must be determining why you are making a budget. This will set you on track to follow through with your budget and have goals to achieve. Plus, rather than worrying about your financial status, you can have the assurance that you, 1) have enough money, and 2) you’re not spending what you don’t have.
A Guide to Budgeting
There’s no reason not to be able to learn how to budget since there are numerous resources accessible online and many apps you can download to track your spending for you. These tools do the work for you, but in order to continue to follow your budget, you should always focus on why you are allocating money – reducing worrying and spending better.
1. Review Your Current Spending
Get a good idea where your money is currently going by reviewing bank statements that show where and how much you’re spending. From there you can determine how to categorize payments and find any problem areas to reduce your expenses in that category and add to categories that need more.
2. Determine Your Budget Type
The 0-based budget is a spending plan where every dollar is allocated to its appropriate category with nothing left over for the month. This plan is more restrictive and requires more disciplined spending habits.
Over time you can switch to the more popular budget type, the 50-30-20 budget, with 50% of your income going towards your needs like rent, mortgage, food, 30% for anything you want, and 20% that goes towards your savings.
3. Keep Yourself Accountable
The most difficult part of making a budget is tracking your spending manually. But of course, in this day and age technology, there are both free and paid apps for that. These apps can notify you when you’ve reached your spending limits and show how much more you have to spend.
You can also try the cash method where you put money in an envelope dedicated to each category, then when you empty an envelope, you know that you can’t spend anymore.
With your new spending habits, you can learn where you can spend less and save more to meet your goals.