Money is something you either love or hate depending on how you use it. The main problem people have with money is that they spend haphazardly and fail to budget.
When you formalize your money life with a budget, you're more likely to save and do right by every dime you earn. Consider these smart budgeting tips so that you can control your money, rather than letting it control you. Here's how to budget better below!
1. Learn Exactly How Much Income You Bring In
You can't budget without first knowing how much you make. Consider your income so that you're not in the dark about your finances and what you'd like to do with it.
It's easier to know what you can afford when you know what you earn each month or year. Your prior tax return or a pay stub is a positive place to start.
If you work on a freelance basis, grab a copy of your prior three month's earnings, and calculate an average. Take out a percentage of this revenue for taxes and pay estimated taxes each quarter.
2. Understand Your Financial Goals And How Your Budget Can Help
Next, clearly outline whatever goals you have for your finances. A person looking to slowly save for retirement will have different needs than someone aggressively looking to pay off debt.
Get clear on your goals so that you can build your budget with this in mind. You can check out more articles here on Bootstrap Business in our Finance and Loan sections to learn how to pay off your mortgage sooner.
3. Lay Out Your Costs of Living
Take an account of every single bill you pay.
This includes your rent, home insurance, auto insurance, car note, electricity, water, internet, and any services you subscribe to. Consider how much you spend on food, and make sure you have enough money set aside for household purchases and putting gas in your car.
Once you're clear on your costs of living, you can separate necessities from luxuries and find areas where you are spending too much.
4. Make a Plan For Your Debt and Savings
Your budget should include a plan that helps you pay yourself first. The financial classic "The Richest Man in Babylon" says to save 10% of your income to build your personal coffers.
Whatever you decide on, make sure that you're prioritizing building your savings, particularly if you don't already have 6 months of living expenses saved. This 6 months of savings will help you out if you end up in a financial emergency and don't want to dip into your current cash flow.
Getting out of debt is also a vital part of your budget. If you're in debt you're already in the hole every time you get paid. Having a plan to pay off this debt at a reasonable pace will allow you to nip this issue in the budget so that you keep more of your money.
5. Allow Some Room For Investing
Make sure to circulate your money in a way that brings you more back. The barrier of entry to getting into stocks, bonds, and mutual funds is low right now. You can find online accounts that don't even require large minimums like Robinhood or WeBull. Most investment exchanges and brokers have low fees now as well.
When you take it upon yourself to invest even a little at a time, it'll begin paying dividends over the years. Then your smart family budgeting improvements will be working for your you.
6. Formalize the Budget and Use Software
With all of these variables laid out you're now ready to officially put together your budget. After accounting for your living expenses, leave yourself a dollar amount or percentage for things like eating out, entertainment and non-necessities.
For your necessities, make sure that you're sticking to the budget and not overspending. Record dates for all of your bills to make sure that they get paid on-time without racking up expensive late fees.
Use a software platform that lets you put this budget into place so that you can plug information in and track it as you go. Many of these platforms can sync with your bank account so that you can see how your budget is working in real-time.
7. Automate Whatever You Can and Always Address Your Taxes
Automation is critical when you're trying to build a winning budget. You can set your bank account up to transfer money to a savings account every week or on whatever schedule works for you.
Automating your bills makes it so that you never miss a date and so that you won't have to worry about getting your utilities cut off.
Make sure you're just as aggressive about your taxes. If you're an entrepreneur, you can automate estimated tax payments from your accounts so that they go to the Internal Revenue Service (IRS) through a third-party service.
8. Put the Budget to Use in Your Life
Above all, you have to put this budget to use for it to be successful. Make it your foundation for financial freedom so that you'll always remember why you're doing it.
Keep the budget on your phone, your wall, in a journal, or anywhere else that will serve as a constant reminder. Constantly working the budget will make it easier and more successful over time.
Put Some Smart Budgeting Tips to Use
A few smart budgeting tips is all it takes to turn your financial life around. The suggestions above can help you create a working budget, which is the first step toward acquiring wealth.
We've got you covered when you want to learn about a variety of subjects beyond just smart budgeting. Come back to learn more about finance, real estate, business, insurance, and more to learn how to budget better!