Saving money can be difficult in today’s uncertain times, especially when you’ve missed work and noticed the increased prices, but it’s not impossible- especially if you start with a budget.
Setting and keeping a budget is an easy way to organize finances, keep track of expenses, and can help you save money in the long run.
But keeping a budget is more than just separating money into different categories. It also needs dedication, willpower, and a plan for success.
If you’ve never had a budget before, it may take months, or even years, before you see success. However, a budget can be flexible and can adjust to the needs of the individual.
But where do you begin?
Dave Ramsey, the leading expert on budgeting, recommends using the “envelope method” for your first budget. The envelope method is where cash gets allocated into specific envelopes, and when the money runs out, that category is no longer available. It’s an easy way to visualize where the money gets spent, but it also relies on people using cash in today’s digital world.
Here’s how you set it (or any budget) up for success:
Review Your Expenses
Take some time to go over all your current expenses. These can include gas, groceries, rent, entertainment, medication, and anything else you buy regularly. Once you know how much you’re spending each month, you can start dividing it into categories.
Create Categories With Limits
Create your categories and limit how much money goes into them a month. For example: if you have a problem resisting thrift store sales, make a thrift store category and put some money in it (for this article, we’ll say $40). Then, once the $40 is gone, no more sales until the next month. These limits will help you recognize bad spending habits, as well as giving you more control over your finances.
Add The Money
If you’re going the cash route, this is where you figure out how much cash to withdraw- keeping in mind that some bills (such as phone or utilities) are better off being paid digitally.
If you’re going the digital route, add your funds to the categories. You can do this through apps like GnuCash, EveryDollar, PocketGuard, and more. Then, all you have to do is remember to enter in the transactions as they happen- otherwise, you may end up overspending.
Stick With It
It takes willpower and determination to look at something and say, “nope, it’s not in the budget today.” But, the more you get into the mindset of only spending what you have, the more you’ll be able to organize and save in the future.
Types of Budgets
Now that you know how to create a budget, here are some examples of budgets to give you a better visual.
It’s simple, organized, and easy to use. All categories are renewed monthly and can change according to needs.
- Gas: $80
- Groceries: $100
- Rent: $650
- Utilities: $150
- Savings: $10
- Miscelanneous: $50
- Total: $1,040 per month
For the more experienced budgeters, this budget can include sub-categories and yearly entries.
- Car: $400
- Gas: $80
- Insurance: $75
- Upkeep: $45
- Yearly repairs: $100
- Car Payment: $100
- Groceries: $400
- Food: $200
- Home goods: $200
- Medical: $85
- Doctor’s Visit: $40
- Medication: $45
- House: $1,000
- Rent: $650
- Utilities: $150
- Upkeep: $200
- Savings: $115
- Total: $2,000 per month
These are extremely basic and only two of the several budgeting options out there, but they’re perfect for beginners.
Another thing to consider is if you want your budget to be a save-first or a spend-first.
A save-first type of budget is where you put X amount in savings before dividing it into categories.
The spend-first is where you divide the money into categories and save whatever’s left.
Both are valid ways of saving money, but the save-first will grant you a little more of a cushion than the spend-first. However, the spend-first makes sure you take care of your responsibilities.
Which one do you prioritize?
Saving and spending money may seem like a complicated matter nowadays, but with a budget in place, you’ll be amazed at how quickly your financial security (and peace of mind) will grow!