The Beginner’s Guide to Budgeting: How to Set and Stick to a Budget
Managing your finances can be an overwhelming task, especially without a well-thought-out budget. Although creating and sticking to a budget can feel challenging, with careful planning and commitment, you can set yourself up for success. Informing yourself on how to develop a budget is the first step. Here’s a guide to setting and sticking to a budget:
Step 1: Calculate Income
The first thing you need to do when creating a budget is calculate how much money you have coming in. Sources of income include your salary, funds from financial assistance programs, retirement distributions and any investment income, like dividends or interest payments. Calculate how much money you bring in each month to establish a strong starting point for the rest of your budget plan.
Step 2: Calculate Expenses
Once you’ve figured out how much money you have coming in each month, it’s time to calculate your necessary expenses. This covers costs like rent, mortgage, loans, insurance, utilities, groceries, gas and other household bills. When calculating these expenses, you shouldn’t include things that aren’t necessary to live, like entertainment or shopping. These will be calculated later in a separate portion of your budget.
Step 3: Track Spending
Take a look at your bank statements and add up how much money you spend on average on non-essentials. This is called discretionary spending, which includes subscriptions, dining out, entertainment, hobbies, memberships, shopping and other things you may spend money on that aren’t household bills. The goal is to paint a clear picture of where your money is going.
Step 4: Set Goals
Now that you’ve calculated your salary and expenses and identified your spending habits, you should have a better understanding of your finances. Now, it’s time to set goals. Take a look at your income, living expenses, and the amount you have left over. You should plan to allocate your leftover money in a way that helps you reach your financial goals, whether it’s to save up to buy a home or establish an emergency fund. There are many allocation tactics you can use, but one of the most common recommendations is to save about 20% of your income. The key is to set goals that are attainable for you. This helps you stay committed to your budget and on track to achieving your financial goals.
This is also the time to start thinking about how you want to tackle debt. Setting goals to pay down loans is an important step in creating a budget. AutoPayPlus can help you pay down your loans faster by setting you up with automated biweekly payments, which will enable you to make extra payments toward your principal. That way, you never miss a due date, and you can stay on track. This service is tailored to your unique financial situation. You can choose how often you’d like these payments to be made. Whether it’s weekly or bi-weekly, you match your loan payments to your paychecks to make sure you’re always in line with your budget.
Step 5: Make a Realistic Plan
Even the most well-developed budget can have missteps or unexpected obstacles if you approach it without a plan. Writing out your budget while setting specific dates and milestones you’d like to achieve can help you stay focused and stick to your budget. You can set up automatic payments to household bills and other expenses, including loans, through financial concierge services, like the ones offered at AutoPayPlus, to make keeping up with your budget more convenient. While this step looks different for everyone, the important thing is to create a plan that’s realistic for you to follow.
Step 6: Make Adjustments to Your Spending Habits
The best way to stay on track with your budget is to adjust your spending habits. It’s easy to fall into a pattern of buying the latest items or making frequent impulse purchases. Every time you plan to go out, set a dollar amount for that outing that aligns with your budget. When you go shopping, create a list and stick to it to avoid impulse buys. You can also explore opportunities for extra savings on items you’re looking to buy, including coupons or promotions. Being mindful and proactive when it comes to discretionary spending is the key to maintaining a successful budget.
Step 7: Use Budgeting Tools
There are several budgeting tools available to help you stay on track. When you become a member at AutoPayPlus, you can manage all of your loans in one place, making it more convenient to stay on track with your budget. When you become a member at AutoPayPlus, you’ll discover Budgeting Done Better™. You can manage your budget and spending and identify how much you have left over after paying your necessary expenses.
Step 8: Review Your Budget Regularly
One of the most important steps you can take to help you manage your budget is to review it regularly. Take time every month to review your progress and see if you’re hitting the milestones you set. Understand that setbacks and challenges happen, and you can always make adjustments to your budget to fit your current scenario. For example, if you get a new job that pays more, review your budget and plan to increase the amount allocated to savings. There are endless scenarios that could cause your financial situation to change. The important thing is to be flexible.
Creating and sticking to a solid budget is the first step in taking control of your finances. However you decide to structure your budget, AutoPayPlus is here to support you on your financial journey through a personalized payment program. Contact us online or book a free appointment with a Payment Concierge to join the 500,00 AutoPayPlus Members who we are helping or have helped work toward a brighter financial future.
