Lifestyle. Career. Finance

How To Start a Budget And Stick To It

Friday, September 15, 2017

A piggy bank on a white surface

I've always considered myself to be quite disciplined when it came to my finances. I learned at an early age how to save money, so that I may enjoy it for later. So when I found out that I was pregnant, I wasn't too concerned about how my husband and I would handle our finances. I already had a master plan on what we needed to do to start a budget and stick to it.

I like to give my mother the credit for this.

Growing up, my mother used to keep a satin pouch. I would see her stick a dollar here or there into it. But it was one day when she pulled out the satin pouch that I noticed she couldn't even zip it completely because of how much had been added to it over time.

As a kid I kept thinking to myself, so that's what happens when you save money. But what I didn't understand as a child was all that my mother had to budget and organize financially to store that cash in her pouch. I didn't learn this step until I moved into my own apartment and learned about this thing called bills.

I knew that I needed to budget my money accordingly so that I can pay my bills, save money, and have something a little extra for myself. And even now as a parent, I have to factor in the additional expenses for diapers, formula, and other necessities for my son.

Having this budget has helped to always know how much money would be remaining, and what our limitations were.

So here's how it got started and how we actually stick to it.


Income
The first step to budgeting is knowing how much income are you bringing in. Factoring in how often you get paid, whether you're hourly or salaried is a factor as well. If you're salaried, budgeting can be a little simpler because you'll know how much your paychecks will be each time. If you're hourly, this could potentially mean that your paychecks are not always the same. I like to use what my paychecks would be if I so happened to work a minimum amount of hours. This way, you can plan for those times when your paycheck may not reflect when you've worked a maximum of hours.

Monthly Expenses
Understand where your money goes. What bills do you have? What necessities do you spend money on regularly?

I created a list of my monthly expenses and jotted down EXACTLY how much each was. Car loan, car insurance, rent, student loans. If it came from my check each month I added it. I jotted them down in an Excel document where I was able to see all of my expenses and tally how much I spend monthly. There are several other ways you can chart your monthly expenses, I personally found a this document to be the simplest.

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Bank Statements
Your bank statements are a clear indicator of how you spend your money, how often, and on what. Pull your bank statements from two-three months to see what you spend your money on outside of your bills. Make note of all trends. How much do you spend on gas for your car? How often are you getting your pedicures? How much are you spending when you get Starbucks each day? Make note of these miscellaneous expenses and tally them as well. You may be surprised to see how much you're spending.

I found that I spent a lot of money on fast food. It was at this moment that I realized if I reduced the amount of time I ate at a fast food place, I could be saving approximately $20/week.

Savings
Now that you've established where your money goes and how often you're spending, you can now determine what you can afford to save. You will be able to see areas in which you have wiggle room to spend a little freely or where you may want to spend cautiously.

Set a goal of what you want to save. Start small. Maybe for one month set $20 aside. Then the following month set $50 aside. Doing this gradually will help you to see where you're making progress. If you set the goal too high, you may become discouraged and find yourself spending more than you are supposed to. By setting a goal small and working up, it helps to develop the level of discipline required to stick to your budget.

Have a Buffer
I can't stress enough the importance of having a buffer. A buffer is basically leaving an approximate amount of money aside for no specific purpose. It's there as a wiggle room in the event that you may need it. This is not to be confused with Savings. You don't want to budget your money so tightly to the point that you have nothing remaining after bills have been divided and savings has been added.

Live Within Your Means
It wouldn't make sense to acquire more than $1200 in monthly expenses if you make less than this amount. Once you have factored how much money you make, how much bills are, and added into your savings, make sure that you're not depleting your funds by living above your means. This is how the cycle of paycheck to paycheck begins.

Understanding what you can and can't afford is key to sticking to your budget. You will never be able to optimize your income if you're acquiring more in bills than what you bring home.



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