The Ultimate Beginner’s Guide to Budgeting and Saving

Do you want a financially secure your future? This beginner’s guide to budgeting and saving will help get out of the deep hole of overspending and live well.

Budgeting and saving money are areas that many people grapple with, but with discipline and consistency, it is possible. We are in a digital era where people’s lives are displayed on social channels. Still, most don’t understand that the majority only post highlights of their lives, leaving the reality behind the scenes.

So, don’t try to copy what others are doing by living beyond your means or borrowing. Create a life that you’ll be proud of several years from now by budgeting, saving, and investing. However, don’t forget that life is short and deny yourself small life pleasures; treat yourself every once in a while.

This article will discuss ways to help you get in a budgeting mindset, budgeting tips, and what you will gain by budgeting. But before that, let’s understand what budgeting is.

What is Budgeting?

Budgeting is not a term that many like to associate with as they feel that it sucks the fun out of life. Because of this, many people choose not to budget, robbing themselves of the ability to learn the power of saving and controlling their finances.

Having a budget helps you track your income and expenses and ensures that you have money set aside for your savings. If you want to start investing, budgeting will ensure that you have funds set aside for your investment kitty every month.

Why is Budgeting Crucial to Saving Money?

Budgeting is a fundamental pillar of personal finance, and as we all know, money touches every aspect of our lives. And by creating a spending plan, you will be able to determine where your money is being spent. This will help you eliminate bad spending habits and put more money into your savings to reach your goals.

It would be best if you started budgeting as early as possible as this will help you be in control of your future finances, enabling them to prosper. That is why budgeting and saving go hand-in-hand.

How to Get Your Mindset Focused on Budgeting

  1. Determine why you want to start budgeting

According to data collected by CreditLoan, only a third of American households adhere to a strict budget, while the rest live paycheck to paycheck. Therefore by choosing to start budgeting, you are joining the minority who are after financial freedom.

Although budgeting is an excellent way to track expenses and save money, you must define your goals before starting this journey. Some of the reasons people choose to budget include;

  • To save more money
  • To save for investment
  • Reduce their spending
  • End fights between couples
  • To break the cycle of living paycheck to paycheck
  • To stop living above and beyond your means
  • To have a better grasp of their finances

This may seem like a silly practice to you, but your mindset and motivation play an essential role in handling money.

Read Also: Track Expenses in 3 Easy Steps

  1. Get an understanding of your spending habits

To create a successful budget plan, you must clearly understand your spending habits; if not, your spending plan will be nothing but a wishlist. So, how do you get a view of your spending habits? Create a spreadsheet, and every time you make a purchase, note it down.

It might be time-consuming, but it will give a clear picture of where your money goes. Besides, it’s the most effective method because if you wait until a week or the end month to fill out your expenses, you may find that you’ve forgotten some. Better yet, keep all your receipts.

Alternatively, you can use tracking apps to track your spending by linking your bank account and credit cards. Ensure that you label each purchase correctly to assess at the end of the month successfully.

  1. Set clear and realistic financial goals

After knowing why you want to start budgeting and clearly understanding your expenses, the next step is to set clear financial goals. It would be better if you had specific amounts to work with.

Most common goals if to pay off debts, buy a car, build a house, invest for retirement, emergency fund, and vacation. Whichever goals you set for yourself, ensure they are realistic and attainable.

Make sure that you input the specific amount you need to save to reach your goals because the more specific you are, the higher the chances of achieving them.

  1. Choose a budgeting plan that works for you

There are different types of budgets, and you need to choose the one that fits your needs. These include:

A zero-based spending plan: This is one of the most popular budget plans, and it means that every dollar you earn gets assigned to a specific task. This means that you will have some going into your savings as well as expenses. Although it helps curb overspending, it can be a little bit restrictive.

50-30-20 budget plan: This is best if you want a little flexibility over your finances because 50% is geared towards needs such as rent, debt payment, and food. At the same time, 30% is allocated to entertainment and 20% for savings.

You can automate your savings to ensure that you do not shift away from your goals.

How to Create a Budget?

After ensuring that you have a budgeting mindset, it is time to create your budget plan. If you want to enjoy budgeting, don’t see it as a restriction to your spending; instead, view it as a tool that will give you financial freedom.

There are no set rules when creating a budget because each person’s needs and goals are different. More so, create a budget plan that will not have you straining, and you can adjust as needed. Some of the basic things you need to incorporate into your budget plan include:

  1. List your income. This refers to your take-home amount, and if you have any other extra income, include it.
  2. List fixed expenses. Refers to those expenses that do not change, such as rent, mortgage, car loan, and personal loans. They are easy to track because they do not change unless you are late in making payments. Budgeting helps pay your bills on time and avoid racking up late fees.
  3. Fluctuating expenses. Some of your monthly fees are not fixed, such they change depending on the situation. These include electricity bills, water bills, groceries, personal items, and households. You can keep track of these expenses for several months and set your budget depending on the average.
  4. Emergency fund. Always have an emergency fund as it can come in handy after encountering unexpected circumstances such as hospitalization.
budgeting and Saving guide for beginners
Budgeting and Saving for beginners

Best Tips to get yourself started with budgeting?

  • Track your income and spending

If you want your spending plan to work, you have to carefully track your income and how you spend it for several months. You will miss some points, but don’t worry because it does not have to be perfect; you just need to try, and you’ll nail it down with time.

Depending on the method of payment you use, you can easily track it by recording your expenses on a spreadsheet. You can track card payments by downloading your bank app to get a statement and see where the money has been spent.

Alternatively, you can download free spending tracker apps.

Tools: 10 Best Free Budgeting Apps

  • Use paper and pen  before switching to digital apps

If you are just starting with budgeting, it’s best to start simple with just a pen and paper. This will help you get a rough idea of how you are spending your income.

You can use this method for a few months, and once you get the hang of it, you can switch to free budgeting apps or any other user-friendly paid budgeting.

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