Finding out “why”
This is the first step in planning your budget. The reasons could be you want to minimize your spending habits or you have a debt repayment plan and to be debt-free or want to save for any of your long term goals. This step is very necessary because without deciding the purpose of your financial budgeting you can’t plan a proper budget.
After deciding your whys you need to set your priorities according to your priorities. It is about finding out what’s important to you then controlling the habits of spending and saving to achieve the “why”.
These include your long term and short term goals and syncing them in the order of your priorities. Like you are going to marry soon so you want to buy a house in the future or if there is a couple who wants to plan their children’s higher education expenses, so priorities should be decided at this level.
Track your spending habits
This is the most important step while planning a budget. Spending habits as if you are spending on the unnecessary things in your life. Check your monthly expenses yearly expenses and try to figure out which is unnecessary for you and cut out them.
Choosing the method
with the 50/30/20 rule, 50 % of your take-home pay goes towards your needs. 30% should go towards your wants or discretionary income. Remaining 20% of your take-home pay should go to your savings. for example, if your income is 50000 then 25000 should go towards your need like housing utility, insurance, groceries. 15000 should go towards your wants and the remaining 10000 should go towards your savings.
There are various methods of budgeting like zero-sum budget, anti budget, money flow, etc. Find out which one is best for your according to your spending and priorities.
live with your Budget
There is no use of the method you have decided if you don’t implement it in your life. create a spreadsheet use pen and paper for creating the spreadsheet or you can use many digital tools that are available online for the same like Mint, Clarity money, Tiller money, You need a budget, Digit, Qapital, etc.
Updating the Budget regularly
Review, Revise, Improve
There is no rule for improving your budget. It is up to you your personal satisfaction with your spending habit.
You pick up a budget applied and then not satisfied with the can savings then you can revise your budget again make it do some improvements accordingly again apply and see the result.
Here are a few helpful things to keep in mind while updating the budget-
Slash expenses- If in your budget you are finding yourself overspending then see where you can cut those expenses.
Create seasonal budgeting-
Besides the main budget, a seasonal budget for holiday and summer season should also be maintained.
Link existing habits with new ones-
If you have added some more new spending habits then link that with your existing ones.
Set dates to review and tweak-
You should always review your budget whether you are happy with it or not.
Get help if you need–
MMI offers free budget counseling to anyone struggling with the management of the budget.