The COVID-19 pandemic affects everyone to some degree. Even if they’ve stayed healthy, the impacts of the COVID economy have many people watching their money more carefully. If that sounds familiar, a well-developed budget can help you stay on track of your finances so you can spend less and save more. It may also give you good footing to plan for the future.
So how do you get started? Learning how to budget is about setting spending limits and sticking to them. Look at your current earnings, allocate the amount you need to stick to, and develop the discipline to adjust your habits so you don’t spend more than you should each month.
Adhering to a budget is an excellent habit for helping you achieve your financial goals.
Easier said than done? Here are some simple, actionable tips to help create a successful monthly budget:
- Document your spending. This can be as simple as pen and paper or a spreadsheet where you track our earnings, your monthly expenses, and how much money you have left at the end of the month.
- Categorize your expenses. Each entry should be categorized so you can easily see how much you spend on monthly bills, essentials and discretionary costs. This will help you keep your items organized and easily searchable.
- Calculate your “regular essentials.” Ask yourself, what are the necessities? These are the must-have items that you regularly spend money on. Essentials include things like rent or mortgage, utilities, insurance and anything else that you can’t do without.
- Be specific. Don't use generic terms such as “food” or “transportation.” Make sure you note exactly what you spent your money on and how much. This will help you visualize your spending patterns as you categorize them and add them up at the end of the month.
- Input your “discretionary expenses,” too. Include items that you spend money on but are not necessities. These include things like take-out meals, entertainment, travel, etc.
- Include a “savings” category. A great target for savings is 10% of your paycheck. While not everyone can afford to save this amount every month, even a small amount of savings can help you prepare for unexpected events.
Adhering to a budget is an excellent habit for helping you achieve your financial goals—including saving for retirement—much faster. Get started today!