Budgeting is the foremost important part of personal finance if you know how to create a budget and stick to it then you can save tons of money. What is budget and why it is so important, and how you can make a proper budget without getting headaches then this is for you.
Many people think that budgeting is very complicated but trust me in this article you are going to know How to create a budget in simple and practical ways.
Contents
What Is Budgeting?
Budgeting is all about creating a plan so that one can spend according to that in simple words.
Before we directly jump into how to create a budget let’s have a look at why it so important.
Why Budgeting Is Important?
- Budgeting helps you to have control over your expenses.
- You become conscious about your future regarding your money.
- Budgeting makes you disciplined.
- You can save lots of money for your emergency funds as well as for your wants.
- You become financially literate.
- You get control over your emotions also you can call yourself mature😉
How To Do Budgeting?
These are not the only budgeting steps that you can follow for budgeting there are various ways that you can do budgeting. These budgeting steps what I think that it is simple and practical which mainly many of you can follow that’s why I am giving these steps ok .😅
1. See Your Last 6 Month Transactions
By seeing your last 6-month transaction you will get to know how your cash flow is going. You can see the last 3 months also but if you want to get a clear idea you can get the record of 6 to 12 months so that you get to know your transactions it is time taking might it can take one day, two days, or three days depending on your transactions.
But it is far more important that you need to give those days to analyze your past transactions so that you can save lots of money. Go with this first step you will get to know.
2. Know Your Cash Flow
You have to know where your cash flow is coming from whether it is coming from only one source might you are doing the job or whatever it can be or it is coming from multiple sources you have to know it and how much it is coming you have to have an idea about your income.
So that you can manage your expenses if you know properly your income you can have an extra edge on expenses.
3. Track Your Expenses
Check your expenses it can be your household activity for your school or college fees, travel costs, or house repairs or maintenance of your house you have to check and track everything whether you are spending on your holidays, on your parties, or anything on your clothes, etc.
Another thing is that if you can’t track anything you can’t manage it too. So It becomes very important to track your expenses.
4. List Down Your Healthy Cash Flow
What do I mean by healthy cash flow I simply mean the money you are spending on things which are valuable which is adding value to your life it might be anything for example your admission fee which helps you to gain knowledge it can be your investment in your particular business or share market or it can be anything these all are healthy cash flow which will give you a great return on your investment.
Whether it can be your knowledge or it can be on your money always it is a good Cashflow and also it can be your needs all these will go under healthy cash flow.
5. List Down Your Unhealthy Cash Flow
I know you got it what is unhealthy cash flow everything which is opposite or contrasts to the healthy cash flow will go under unhealthy cash flow. Such as frequent parties, frequently having junk food, or unwanted unnecessary things you don’t need at that time you keep in your house store you can call as well also.😜
Such a thing will give you a small amount of pleasure for a particular moment or a few days after that it becomes useless for you I know you will say yes so try to list down all this Unhealthy cash flow.
6. Cut down your unhealthy or unwanted things
Seriously you have to cut down on these things because we make a budget for our safety and proper financial management if you can’t cut down all your unwanted things try to minimize your unwanted things list.
First, you will try to cut down all your unwanted things, or second, you will try to minimize those list of unwanted items choose any one of those.
7. Create A Plan
Now here comes the main point you know your last past transactions if you know your cash flow if you know where cash flow is going whether it can be on the healthy as well as on the unhealthy side after cutting down or minimizing your unwanted cash flow things you will make a plan okay.
How much you will spend on needs, wants, and desire not everything, and make a plan.
For example, let’s say you earn $3000 a month okay in the last couple of months or years you had expenses of around $3000 you can’t save anything. After deducting the unhealthy cash flow of 800$. You got to know that you can save 800$ every month and that is what you can save or invest for your future. So on.
8. Stick To It
Stick to it with your budget okay it can take the time it might get you frustrated but still, for your good future and for your well-being you have to do that hard work, and if you get too used to with this you will hardly have to give much more time every time. Have patience and belief in yourself that you can do it.
9. Review
After a couple of months, you have to review your budget let’s say you made a budget on starting of the month and after the end of the month, you will review your budget whether your budget is going according to your plan or not might take a couple of months to adjust with it no problem but at least go with that so that you get yourself into that zone.
Disclaimer:- You can’t live your whole life on a single budget you have to make your budget flexible and you have to make some changes after a couple of months or years so that you can stick to it.
Because as you know the days pass our needs wants and desires also change so according to that we have to make a budget. Don’t follow other budgets you have to make your budget by following all the steps mentioned above.
Best Budget Calculator
This is the best budget calculator from my perspective if you want you can check out this 👇🏿
https://www.calculator.net/budget-calculator.html
FAQ’s
Which budget is best?
The budget which suits you the best is the best in the world 😌
How do you budget monthly?
Know your monthly income know your expenses track all your expenses of healthy and unhealthy cash flow cut down your unhealthy cash flow or minimize your unhealthy cash flow make a budget on that.
Difference between monthly and yearly budget
As the name suggests monthly means one month’s budget you will make a monthly budget and as the name suggests yearly budget means you will make a budget yearly at the start of the year and you will try to stick with that throughout the year.
If you don’t know how to create a budget you can’t manage money whether you are earning lakhs of dollars you are going to be financially broke in the future.
Any query regarding this comment below and if you want any other article on any topic related to personal finance comment below I will try to make on that particular topic and if you like and understand the concept don’t forget to share because sharing is caring. 😇