I’ve been there. And I’m still actually here. The whole wide, tricky world of budgeting. It’s a task that we don’t necessarily want to do but HAVE to do.
However, you might be wondering – why do we really need to have a budget? Shouldn’t we just take it day by day or enjoy life to the fullest without worrying about money? If only, right?
First off, we don’t want to fall into the scary trap of overspending and massive debt. I personally know some folks who prefer to just get by. For me, however, I prefer to have savings, some sense of financial security for the future and be able to know what I earn and what I can only spend.
Let me tell you right now, however, that budgeting may sound simple but it’s not necessarily easy. If you’re not used to doing this, you might feel overwhelmed by many factors including how to begin, what to do, which ones to pay first etc.
Let’s start with a really basic formula:
- Keep track of what you earn
- Keep track of what you spend
- Keep track of what you’re only allowed to spend
- Earn minus spend = savings
- Rinse, lather, repeat
In my case, I start by writing down (yes, I’m still a pen and paper type of a girl) my sources of income and what I expect every month. Then I also write down my usual expenses (food/groceries, electricity, water bills, insurance, auto-debit savings, gas for the car etc) and some miscellaneous expenses. I also make sure that I set aside a monthly “payment” for myself. Sort of a salary. Because it’s also important to pay ourselves, right?
So exactly why do we need to have a budget?
- Because budgeting is a process. It’s a strategy. Something that you need to do regularly if you want a secure future. Once you have this regular “chore” down pat, it’ll be easier for you to plan your life.
- Because expenses can easily add up and your income might not be as stable as you think. Take the case of this pandemic. Who knew thousands – if not millions – of people would lose their income, homes, savings and a lot more? For freelancers like myself, sources of income may not be as regular anymore. Therefore, there’s definitely a need to budget.
- Because we also need to plan for discretionary expenses. These are expenditures that you WANT but not necessarily need. That quick getaway to a winter place. That dream vehicle you’ve always wanted. That skin care set that has been calling your name for months! Learn how to budget so you can set aside an ideal amount for you to be able to afford that want.
- Because there’s simply nothing better than feeling free from (major) debt. I mean, let’s face it, there will be instances whereby you’ll have debt but not to a point where you’ll just feel downtrodden and trapped.
Here’s a really helpful guide on budgeting. Give it a read. I’m sure you’ll get a lot more great tips!
Learn more about practical tips on budgeting on DebtConsolidation.com