73% of people avoid creating a budget. If you’re one of those people, then let’s get back to the basics of budgeting so you can achieve financial success.
Budgeting is not a dirty word or one you should fear.
When you get down to the basics it’s a real breeze to create a budget that works for you.
For ages I associated the word budgeting with negative feelings.
Feelings that I can’t afford to have anything because I had to save money for bills etc.
But it gets better.
After learning these basics to creating a budget that works for me, I achieved financial freedom and now I have positive feelings around money.
So if you are in a position, where you’re thinking I don’t have enough money to do budgeting, check out these 7 basics I follow for financial success.
5 Budgeting Basics for Financial Success
Making a budget, on the other hand, isn’t difficult if you know how to go about it.
Budgeting Basics 101 Know Your Cashflow
Robert Kiyosaki said
Creating a budget you need to get to grips with the two most important parts.
- Cash coming into your account
- What money is leaving your account
It’s important to know your cashflow because you can’t plan if you don’t know what you don’t know.
So sit back with a coffee, play some relaxing music, grab a notebook and pen, and let’s get down to basics.
Each month, you must know exactly how much money comes in, and how much money goes out.
It’s much easier to build an action plan once you have those figures.
Simple budgeting systems like the 50-30-20 budget helps you to keep track of your expenditures without having to maintain a lot of categories.
Divide your spending into three categories:
50% for what you need: 30% for what you want : 20% for savings or debt repayment.
Adjust the percentages to suit your own life and make the budget work for you.
However if you’re a business owner or freelancer and getting paid is inconsistent, use the law of averages.
To use the law of averages you need to look at your previous quarter or years earnings.
Calculate the monthly average of your previous periods earnings.
This will provide you with a starting point for budgeting.
Don’t know what your monthly spending is?
It get’s better as we dive into how you can track your money.
Track Your Money
Adding up all of your monthly spending no matter how scary or shameful it might feel
You have to bite the bullet and just do it.
Begin with the payments that are consistent and fixed.
These could be payments such as your mortgage or rent, car, insurance, debt, and taxes.
Doing this is beneficial because it makes budgeting easier when expenditures don’t fluctuate significantly.
Once done, it’s time to dive deeper and see where the rest of your money goes.
To assist you with this step, take out your most recent bank statement.
Make a list of your monthly expenses such as
Create a monthly budget spreadsheet and keep track of these costs.
This will give you a real look at what you’re really spending each month.
Just don’t forget to add that extra night out or takeaway too!
Now what about your savings? They’re important also.
Are You Budgeting For Your Savings, These Are Basics For Financial Success
Savings is an expense, too
Giving your savings the same priority as your living expenditures is the only way to take it seriously.
Setting aside a certain amount at the start of each month and your savings will increase considerably faster.
Saving might be difficult, that’s if we even remember to do it at all.
But having savings is important to buy a holiday, house, car, or even just having an emergency fund.
Open a savings account and build a nest egg for those larger expenses or retirement.
Setting goals is not just for losing weight or earning a specific amount in a set time.
You can also set money goals and create a budget around them.
Set some financial goals for yourself, and utilize your budget to help you achieve them.
Whether you’re trying to pay off student debts, buy a house, or save for retirement, having a good budget will help you get there.
These budgeting basics will help you recognize your spending habits (the good, the bad, and the ugly).
When you fully recognize your spending habits, you can eliminate any unnecessary expenses.
Eliminate any unnecessary expenses and receive a clear view of your financial situation.
This knowledge gives you back your power and be in full control or your spending habits.
Full control so you can plan for any unexpected bills, or financial setbacks.
Don’t be scared to experiment with several budgets until you find the one that works best for you.
Your budget doesn’t have to be flawless.
A budget simply needs to be appropriate for you.
Be Self-aware & Don’t Compare Yourself To Others
Only you are living your life and are living the circumstances you have.
These circumstances are different from others you see.
I could compare myself to another UK entrepreneur and see them living a ‘better’ life than me.
But what I don’t have is their circumstances as to why they’re in the position they’re in.
In fact, I don’t know anything about them apart from the image they are projecting onto the world.
Moral of the story is to stop comparing yourself to others when we’re not in the same boat.
When you stop comparing yourself to others, learn about yourself.
Learn about yourself and your harmful habits, and then devise a strategy for overcoming them.
One of the budgeting fundamentals is to understand your financial strengths and weaknesses.
If you have a habit of blowing money at the shops, stay away from them entirely.
We know how they can be.
Or if you’re often tempted to eat out, stock up on groceries, so you’ll be more likely to cook at home.
Knowing yourself and your flaws might help you stick to the budgeting basics.
Now you’ve learned to recognize your flaws, it’s time to setup your emergency fund.
In A Nutshell,
With these budgeting basics your starting your journey to achieve financial success. As discussed earlier in the blog, a lot of this is down to your mindset, use these growth mindset hacks so you move the needle in your life and career.