Budget and Save: 3 Easy Steps that Work

Budgeting can be a challenging task since you may have friends pushing you to spend more while cutting on expenses. Having a too strict budget and emergencies may render you off budget.

If you’ve been having a difficult time tracking your income and the respective expenses for a specific period, then you need to look no further.

Below are three easy steps to follow and budget proficiently to achieve your financial objectives and freedom.

Step 1. Establish your Income

Your income can include your monthly payments and other sources like rental income, pensions, interests, dividends, and remittances. To establish your net income, deduct the expenses from your monthly or weekly pay. If you earn daily, normalize evaluating your costs to develop your net income at the end of the day. It is vital to monitor where your net income is going to avoid uncontrolled cash flow.

It will evaluate your performance report after determining your respective expenses. Your income will be an essential factor while budgeting. Spending more than you earn will result in accumulating debts.

Step 2. Evaluate your expenses

Break your daily, weekly, or monthly spending for easy follow-up. Determine your housing expenses, transportation expenses, and utility expense like food and healthcare. Exclude discretionary expenses (non-essentials you can leave without, like meals at restaurants, latest electronic gadgets, and entertainment).

As you’ve read in step 1, the difference between your expenses and your income is the net income or net profit. If you find yourself in a situation where your expenses surpass your income, your only solution is to make more money or reduce your spending. Reducing your spending would be the preference since it’s easier than hustling more to find extra money. After balancing, the resulting amount is your savings.

Step 3. Plan for your savings

Congratulations, you’ve finally saved. Ever heard of Senator Elizabeth Warren’s 50/30/20 money-saving rule? Well, I am going to break this for you in simple terms.

To achieve the 100% saving plan, limit your needs to 50%: examples are; insurance, healthcare, utilities; these are necessary for survival.

Limit your 30% on wants: these are not essential, but they are part of our life. They include; dinner, movies out, new clothing, vacations, and tickets to sports.

Save 20%: you may channel your savings to debt repayment or investments.

Conclusion

Circumstances do occur in our lives, like having children in your family and juggling different priorities in life. This makes income depreciate or appreciate, thus affecting expense flow. You may need to cut on the house, transport, or utility expenses when income devalues. Follow the above three steps of determining your income, evaluating your expenses, and planning to save. Your dream of financial freedom will finally come to pass. Budget and save now!