Creating a budget for the first time can be daunting; however, it’s a great first step to managing your money and reaching your financial goals. Without a budget, you won’t be able to track how much money is coming in or where your money is going. At a high level, a budget is a plan for every cent you have and will provide you with more financial freedom in the long-run. These 10 tips are a great place to start in creating and sticking to your budget.
10 Budgeting Tips That Work
1. Outline your financial goals
Set realistic SMART goals for your financial future to help create your budget. Your goals should be Specific, Measurable, Achievable, Realistic and anchored within a Time Frame. For example, “I want to have $15,000 saved for retirement in 2 years.”
2. Determine a budgeting model to follow
The 50/30/20 is a common rule used for budgeting, which dictates that 50% of your income should be allocated to essential items such as rent and utilities, 30% should go to non-essentials such as clothes, and 20% should be put in savings.
3. Prioritize paying off debt
Credit card debt and student loans should be a top priority in your budget. You should prioritize paying off any outstanding debt before allocating expenses to non-essential items.
4. Grow your savings
Invest your savings into investments that will grow over time and help you reach your financial goals.
5. Budget to zero
Budgeting to zero means allocating every cent of your income each month to a specific purpose. For example, your fixed expenses, savings, retirement fund contributions, and non-essentials. Practicing budgeting to zero will help you visualize where your money is going and stay on track.
6. Consider using multiple chequing accounts
Consider setting up separate chequing accounts for expenses like rent and utilities and one for flexible categories such as food. This will help you stay organized and makes it easier to visualize the money you have available for non-essential items.
7. Automate your finances
Make a schedule and automate payments for expenses such as rent and utilities. This will ensure you never miss a payment and help you stay organized.
8. Track your progress
Revisit your budget often and adjust it in alignment with changes to your income and expenses. Make sure you’re still on track to meet your financial goals and don’t be afraid to trim the budget as necessary in order to stay on track.
9. Find support
Seek community support from others who follow a budget in order to keep each other accountable and ask questions. Friends and family, online forum, and financial advisors are all great sources of support, depending on what works for you.
10. Don’t forget to reward yourself
To stay motivated to follow your budget, reward yourself with a mix of short-term and long-term gifts to yourself. When you’ve stuck to your budget for a couple months, reward yourself with a special purchase or a night out.
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