Simple & Easy Steps Toward a Strong Budget

As you gain independence and responsibility, you have probably heard from a variety of people that a budget is important to effectively manage your money. Simply put, a budget is a plan used to organize the way you use your money. This is important because how you use your money has a major impact on how you live your life. Some people don’t know where to start and others have trouble sticking to the budget they created. Here is a process that will help you create and stick to a budget, improving your financial life!

Track spending, expenses and income

The first step of building a successful budget is tracking how you spend your money. Tracking your money allows you to see where your money is going whether that’s “needs” or “wants.” There are a couple of ways you can track money: by hand, using excel, using your bank account app, or a budget app such as Personal Capital or Mint. Each way allows you to see your spending but the apps are less time consuming. While tracking your spending, it is also important to track your income. This step will allow you to see your current financial picture and what can be improved.

Self reflection

The second step allows you to take a step back on a personal level and understand yourself. When dealing with money, it is important to know yourself because it impacts how you use money. You may want to live a very lavish lifestyle, a simple cheap lifestyle, or somewhere in the middle. Nobody knows what you want out of life except for you! This is also a time to recognize unique parts of your financial picture like student loans debt for example. Recognizing these personal situations will help you create a solid budget that still solves these situations.

Create the budget

After tracking your spending and self reflecting you are finally able to create your budget! Most budgets are broken down to what you spend each month, but you can break down the time length of your budget however you want, as long as it’s consistent. I use 11 categories for my budget but the number of categories varies by the person. My 11 categories are: housing, utilities, health, subscriptions or memberships, car, food, clothing, saving/investing, miscellaneous, and income. It is also important to be realistic with the amount of money each category needs. Housing and your car should be areas that need bigger amounts of money versus clothing and a gym membership for example. Use your income and your spending tracking to reasonably plan for each category and Wal-Lah! Your budget is created.

Trial and error

Now, some people may create a budget and stick to it perfectly on the first try. I am not that person and most people are not. There are a number of things life throws at you which throws you off course. What is important though, is that you come back to the budget and keep adjusting it until it works for you. This is the most important step to me because it really builds your budgeting habit by following through with the budget and editing it until you find the “sweet spot” of managing your money.

---

Disclaimer: Thegrownwave.com is a personal finance blog, not a professional investment advisor. The content produced from the blog is provided for free and only for informational purposes. Thegrownwave.com does not and cannot promise the accuracy and reliability of any content in comparison to your individual circumstances.