Want to know a scary word? Budget. We often see this word and run from it, distracting ourselves with forgotten dishes or mind numbing cat videos. Setting up a personal budget and following through with it may seem like an overwhelming task, but it doesn’t have to be! Realistic planning before you commit to spending habits will save you from a major headache and free expense tracking apps like Pocketbook. Here is a quick look at why and how to start creating your personal budget.
You might be asking yourself “Why start a personal budget? I’m decent with money and I’m sure spending a few extra dollars a month on coffee or my subscription to ‘Kitty Monthly’ isn’t eating away much at my savings!” How surprised you’d be! Often it is easy to not see or think about where our money is going. Starting a personal budget will track your spending habits. Plus, it shows you what expenses you can cut and save you money! Also, think about the self improvement. Your budget helps you see spots where your spending habits need work. You’ll feel less guilt from overspending and less terrified to check you bank account each month.
Before you create your budget, visualize your “Why”. Why do you need this budget? Whether it’s to improve your habits or help grow your savings, knowing why you need to start a budget will help you within follow through. Remind yourself of your reasons when things get tough or the urge to spend washes over you. Your “Why” will guide your spending.
You have your reason to start your budget, now how do you start? Creating your budget doesn’t need to be an overwhelming task. Instead, break the task down into smaller goals. This will help you start organized.
Know your income - Start by knowing your total income for the year. Pay special attention to what your income is after taxes. This will be your starting point with what you have to spend. Do you have your number? Perfect!
Track your expenses - This is where the Pocketbook application will come in handy. Once you sign up and connect your bank feeds, you will be able to categorise your transactions into groups e.g. groceries, movies, chidcare fees fuel etc. Take the time to review at least one months worth of your spending habits to see where your money is going. Pay special attention to which expenses are fixed and which are variable. Fixed expenses are costs that stay typically the same. Think of your mortgage, utilities, etc… when breaking down this category. Variable expenses are costs that change from month to month. For example, gas bills, groceries, gifts, those coffee runs every Tuesday, and splurges on novelty cat sweaters. Once you divide your expenses into those two categories, you’ll have a better view of where your money is going.
Make adjustments - Now that you have an honest look at where your money is going, see where which expenses you can add and subtract from. Decide on a realistic total expense you can afford to have in each category per month. Write down where you money is going or create a master spreadsheet to organize your information. Also, think about how much money you can set aside each month and put into savings. See if there are any categories you can cut away from and put towards your savings instead. You’ll be surprised how much adding a few extra dollars to your savings each month will add up!
Go, go, go! - Finally, start implementing your budget. It may take time to get used to keeping within your budget, but practice makes perfect!
Creating a budget is about being honest with yourself and willing to make changes. Think of your budget as an exciting opportunity to practice self discipline and help your finances grow! Want more help with creating a personal budget that is right for you? Contact TCA Darwin for more information and let us know where you think your budget needs improvement.