Pro tip: When you’re making a budget, before you put in all the things you’ll pay for this month, set aside money for giving. It’s time to list your expenses! (Yep, this is when that bank account or statement gets super helpful.) Now that you’ve planned for the money coming in, you can plan for the money going out. You can adjust later in the month if you make more and add that extra money to your money goal or another budget line.
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If you’ve got an irregular income, take a look at what you’ve made the last few months and list the lowest amount as this month’s planned income budget line. (Note: You’re working with net income here, meaning what you bring in after taxes or anything else that’s taken out of your paycheck.) Here’s an example: You work weekends as a barista or babysitter? That’s income, and it goes in your budget.Ĭreate separate income budget lines for every paycheck you (and your spouse) get, plus anything extra coming in. Income is any money you plan to get during that month-that means your normal paychecks and any extra money coming your way through a side hustle, garage sale, freelance work or anything like that. That will give you the info you need as you start filling out numbers in your budget. Pro tip: Before you dive into the steps, open up your online bank account or grab your bank statements. Just saying.) Either way, it’s totally okay to start by writing out everything on a sheet of paper. It’s what I use to budget-and it’s the best. No matter how you feel about budgeting right now, no matter what money goals you have, and no matter your income-you can make (and keep!) a budget in just five steps.īut first, decide if you’re making a budget on paper, with a spreadsheet, or in an app. Keep reading to see how to make it happen so you can make a budget that works for you. When you learn how to make a budget-and do it every month-you’re giving your money purpose.
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It’s a plan for what’s coming in and what’s going out. It’s not a restriction on spending-it’s a plan for what you’ll do with your money. Real quick though, let’s define the word budget. Make a New Budget Before the Month Begins.Here’s how to make a budget in five steps. So, here we go-bite by bite, step by step. (You go one bite at a time.) And no one leaps into budgeting like a pro. Because no one eats an elephant by swallowing it whole. Money Dials could include things like fitness, convenience, luxury items, travel, self-improvement , and social status.Making a budget might seem overwhelming at first, but hear this: You can do it. By honing in on your Money Dials-the things you really love to spend on-you can prioritize your spending in a way that makes sense for you. Following this logic, you categorize your expenses into essential fixed costs, important investments, savings goals, and-last but not least-guilt-free spending.īy allocating space in your budget for the fun stuff (minus the guilt), you’re more likely to stick to that budget in the first place. Instead, consider trying a conscious spending plan. The truth is that living a life of constantly telling yourself “no” isn’t sustainable (or enjoyable). Many people assume that effective money management means scrounging, saving, and never enjoying life. You might also have smaller, more short-term goals, like saving for your dream wedding or buying a luxury car. Smart money management can help you achieve those objectives.
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You likely have some financial goals in your life, whether it’s improving your net worth, paying off your college student loans, or achieving FIRE (financial independence, retire early). But without planning for expenses, a big income can lead to big debt.
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But it doesn’t have to be! I spoke with a couple in episode 114 of my podcast who overspent on holidays because their earnings combined were a lot. The entire point of these tools is to simplify money management so you can think about your money less, not more.įor many people, budgeting and planning for big expenses like vacations are a struggle. Simplified spreadsheets help develop your plan, and budgeting apps, like those that automate expense tracking, help you stick to it. Finally, you need to stick to your plan.īudgeting spreadsheets and tools are great resources for creating a conscious spending plan. You then need to decide how much money to allocate to each bucket. You need to start with a bullet-proof budget, categorizing all of your expenses into one of these four buckets: fixed costs, investments, savings, and guilt-free spending. Conscious spending is a great way to enjoy life while still building a financially secure future.