Find tips on how to make a budget that actually works for you at Flip n Finances. Learn how to create an emergency fund, cut your wants, and set realistic goals.
Creating a budget for the first time can be a little stressful. Calculating income and then tracking all of your expenses can be quite the ordeal if you are doing it for the first time. There are a few important things to remember when making a budget, and by remembering them, you will be well on your way to a solid budget.
1) Create an Emergency Fund
A budget, no matter how amazing, can fail very quickly without an emergency fund. Imagine if a costly emergency arises, whether it's a leaky roof or a broken car. If you have a wonderful budget and no emergency fund, then your budget just went out the window. An emergency fund is like a safety net. By keeping $1,000 (to start with) as an emergency fund, you are able to cover surprise expenses and will be able to stick to your budget if something unexpected arises.
2) Cut Your Wants
There are needs. And then there are wants, even if people don't want to admit it. Eating a well-balanced dinner is a need. Spending $20 three times a week at a diner is excessive. By discerning wants and needs, you are able to budget for needs, and cut the wants. If you are not sure if something is a want or not, it probably is. If you have habits that are costing you money, consider stopping! Did you know that if you smoked a pack of cigarettes a day, that costs about $5,000 in one year! Other costly habits can include buying a morning coffee and going clothes shopping on a regular basis. Budget for the needs, and cut as many wants as you can.
3) Set Realistic Goals
Setting attainable goals will make or break a budget. While it's no shame to shoot for the stars, you must stay reasonable. If you know that you spend $500 a month on groceries, do not limit yourself to $250 for this category. There must be a balance when setting goals. Be willing to sacrifice a little, but do not set goals that you cannot meet. You can change your budget as you go. If you find that your goals were a little too strict in the beginning, you can loosen them a bit.
4) Put in on Paper
Writing a budget down with a pencil and paper might seem a bit old fashioned, but it definitely has its advantages. Getting your budget down in any manner is a huge step. However, by writing it out, you are cementing your budget into something tangible. You can find a great template you can print out at the Frugal Fanatic website. Consider hanging the budget up on your fridge or a mirror. By doing so, you will become more accustomed to it and remember to stick to it.
5) Be Flexible
After a month or two of budgeting, be willing to change a few aspects of the budget if needs be. Perhaps too much money was allocated for clothing. Cut it down by a certain percentage and reposition things to fit your spending goals. It's perfectly fine if you do not get the budget down the first time.
6) Don't Micromanage
One of the biggest mistakes you can make while carrying out a budget is to micromanage your money to an extreme extent. The fact that you are implementing a budget already can be a bit stressful. Simply focus on the categories in which you know you need to watch spending. By doing so, you will minimize stress and see progress being made.
Making a budget is easier than most people think. By keeping these 6 tips and tricks in mind, you will start to see a huge difference with your money habits.