Many people would agree that they are shackled due to lack of cash-in-hand by the 2nd or 3rd week every month.
This often leaves us wondering, where did I go wrong?
The reason is often… poor finance management. Excessive online shopping, falling for the alluring EMIs, spending the credit card amount rapidly are some common instances. With a limited income, it is hard to meet the basic monthly expenses.
Herein lies the eminence of budget planning.
Oh! But how to budget money?
Now, this is a mind-boggling question.
Keeping reading as I am just about to unveil the proven budgeting tips.
Proven Hacks to Budget Your Money
#1. Calculate Your Net Income
Those who receive income from multiple sources must do this at first. Most people know how much money they are going to earn in the coming month.
At least you can roughly estimate how much money you will get from various sources.
- Don’t keep thinking all about it. You will forget everything amid the daily hassles. Write down the details* that you can use later for budgeting.
- Exclude the amount you will pay for Social Security deductions, 401(k) taxes, etc.
After subtracting the deductions, you will know the amount that will go into your bank account in the coming month.
#2. Go Digital with Your Budget Planning
Do you think paperwork is too complicated?
Paper-based budgeting does not work these days. Striking off the figures as and when changes happen is overwhelming.
Thankfully, I can now use a digital budget planner to manage everything. It’s so easy to do with a tablet/ iPad and a digital pen (Apple pencil).
From writing down the notes on various expenses to setting budget goals, you can do everything with peace of mind. The editable planner eases your task whenever you want to change anything.
#3. Create a List of Monthly Expenses
Every month, we are obliged to pay a considerable part of our income for various necessities. You can divide these expenses into two categories:
Fixed Expenses- mortgages, monthly installment repayments, rent, insurance, regular monthly tariffs, etc.
Calculate how much money you need to pay for the fixed expenses. This helps to find out the amount left for the rest.
Variable Expenses- energy bills, groceries, medical treatment, etc.
Taking a close look at the variable expenses can give you some ray of hope. You may find possibilities to cut down the costs at least to some extent.
This is why our digital budget planner is loved by all, we help you categorize your expenses. This enables you identify, where your money goals, which will in turn help you plan better and save more.
#4. Set the Financial Goals
Once you are done with the calculation part, it’s time to work on your financial goals. You can split the goals into two parts-
- Short-Term Goals: These goals define the small needs- reducing credit card debt, buying a piece of furniture, a family vacation at a remote location, upgrading kitchen appliances. If things go well, this is possible to achieve within a couple of years.
- Long-Term Goals- Undoubtedly, you need a lot of money to accomplish long-term monetary goals. For instance, you need to invest a considerable amount of money every month to save for retirement.
Our digital budget planner has both short term and long term saving goals tracker. You can get to save for specific projects, trips, home makeover or even for retirement. Writing it all down reminds you why you are doing it and how. Knowing how makes it more possible and attainable. It also really helps with accountability. We all know by now how important accountability is for consistent success.
#5. Evaluate Your Spending Habits
This eminent factor is overlooked when creating a budget for the coming month. Note down how you spend on variable expenses in the past 6 months. It will help you understand where you could save money, what you can avoid, etc.
#6. Plan Your Expenses
Now that you have written everything about your net income, expenses, and financial goals, this data will help you proceed with this step.
Estimate how you will spend the available funds in the coming months. Break down the requirements for the coming month into necessities and desires.
For example, you can’t omit the expenses on medical treatment. But can you avoid the weekend outing?
Prioritize what is absolutely necessary. Cutting down small expenses that can be avoided helps you save considerable amounts at the end of the month.
I tried this to reduce my credit card debt. It contributed a small amount to clearing monthly bills. Understand credit score and how to build wealth.
#7. Follow Budget 50 30 20 Rule
Ever heard anything about it?
You are not alone. I learned all about it in the last few months.
The 50 30 20 budget rule became a buzz after Senator Elizabeth Warren mentioned it in her bestseller book ‘All Your Worth: The Ultimate Lifetime Money Plan’. Learn more about it here.
It is a simple rule. After subtracting the deductions, divide your net income into 3 parts-
- The first 50%- Needs/Essentials
- The second 30%- Wants/Desires
- The last 20%- Monthly savings
To give this a try, the perfect challenge exists for you in the digital budget planner.
#8. Zero-Based Budget Strategy
When someone is running into debt, it is a dream to think of savings.
What can you do?
This is where the budgeting to zero helps. No, it will not empty your wallet.
It is a simple trick to allocate each and every dollar for a concerned purpose. Even before the month starts or you receive the remunerations, planning your budget helps to stay focused when spending the hard cash. Learn all about zero based budgeting and how you can implement it in your personal finance.
When dealing with the stress of running out of funds every month, a well-planned budget is all you need to improve your finances.
To improve the situation, start with small realistic goals. It should not take much time to overcome the existing debt and improve your credit scores.
I hope you found this guide helpful to do the budgeting every month. Whatever you do, a digital planner can help to stay organized.