Budgeting 101: The Introduction to Budgeting

The word "budget" can be scary for a lot of people. But it doesn't have to be! Budgeting is a great way to help you take control of your finances and plan for the future.

In this blog post, we will go over what budgeting is, why you should consider it as an option, and how to get started with your very own budget!

Introduction to Budgeting

Ways budgeting can help you:

• save money by living within your budget and planning for the future.
• make you feel more in control of your life and less stressed about finances.
• help build a savings buffer or emergency fund to deal with unexpected expenses that always seem to come up when least expected, like car repairs, medical

A monthly budget includes two aspects: your income (gross) and expenses (the money you spend on).  

Income includes everything you earn, such as paychecks from your job or salary.

Expenses are the things you expect to spend money on each month.

Expenses may include bills, budgeted items like groceries and entertainment, travel, car payments, mortgage payments or rent, eating out, and savings.

Reviewing your expenses over the last three months will give you a good idea of where your money is going.

It may seem difficult at first, but stick with it – budgeting will make your life easier in the long run. It takes away the worry of paying your monthly bills and makes it easier to know where your money is going.

Why is budgeting important

Budgeting is one of those things that people often put off. It's often not even is not even considered when getting started.

Financial freedom isn't just about living off passive income. It's about having freedom when it comes to making financial decisions.

Budgeting is the first step in achieving financial freedom because it allows you to control your money and not have it control you.

It's not about limiting yourself; it's about setting boundaries so that you're never caught off-guard by unexpected expenses or emergencies.

How does budgeting help you save money

Budgeting is all about giving a goal to your money. Once you've given a goal to your money, look out how much you have left. Whatever you have left is the money you have saved.

Saving money boils down to one simple equation: income minus expenses equals savings.

Budgeting will help you identify saving opportunities that might not be as obvious when there are other competing goals in the way or when you just don't know where the money is going!

As long as you spend less than you earn. You will save money.

The key to saving more money lies in finding ways to reduce spending on things that aren't necessary.

In many cases, budgeting is the most basic way for people to start saving money as they realize where their money is going.

How to start a budget

Now that we've covered the basics, it's time to get to start a budget. Here are some easy steps to get you going:

• Add up all of your monthly take-home income
• Add up all expenses of the next month: It's important to understand you current spending habits to create a realistic budget.
• Identify your personal financial goals: What are you saving for? Is your goal to buy a house, pay off debt, build an emergency fund, save for retirement, save for vacation or other big-ticket items?
• Decide how much you need to allocate to your monthly expenses: Everyone's budget will be different; however, there needs to be an allocation of your expenses to avoid overspending. You can separate your budget into categories based on your preferences and needs.
• Decide how much you need to save: It's your budget. Naturally, you decide how much you want to save. You can choose a percentage of income, saving up until the goal is reached or saving more than what's needed for your financial goals.

The 50/30/20 rule is one example of a budget that can be used for saving or budgeting:

- 50% of your take-home income is allocated towards your needs (rent, food, transportation, utilities)

- 30% of your take-home income is allocated towards saving (retirement savings accounts, saving for emergencies)

- 20% of your take-home income is allocated to personal wants. Fun money.

This popular budgeting rule can help you save money and plan your expenses better without too much restriction.

How to stick to a budget

No matter how you go about your budget, the most important thing is sticking with it! You won’t see much results if you only budget for a week or two and then back out. It's all about consistency.

It can be hard to stick to your budget. Here are some tips that could help you:

• Start paying yourself first: You should set up automatic bank transfers and withdrawals from every paycheck that go straight into a savings account and paying your bills. Doing this before spending your money will ensure you are taken of and future-you will thank you.
• Wait a day before making an unplanned purchase:  If you find yourself constantly going out to buy something and then regretting it later, just sleep on the decision. You are more likely to stick to your budget if you wait 24 hours before making any unplanned purchase decisions. With all the advertisements we see, it's hard not to make emotional purchases.
• Remember why you have a budget:  When things get tough, the greatest motivator is to remember why you began this budgeting journey in the first place. Is it to take control of your finances, build your wealth, plan for the future or live a life you enjoy? Make sure to look ahead and see how you want your life to be.  Sticking to your budget will help you achieve those goals.
• Make sure to allocate for fun: It's important to not restrict too much especially if you're not used to having a budget. It can feel like a chore at the beginning and having an overly restrictive budget will make it harder to stick to your budget. This is why the 50/30/20 budgeting rule works well because you get to spend 20% of your take-home income on things you want.

I hope this post has helped you understand the basics of budgeting and that it inspires you to take control of your finances. Budgeting may not be easy at first, but once you get into a rhythm it will become second nature. It is definitely worth the trouble at the beginning!

When it comes to your finances, budgeting is a great way to take control of the future. It can also help you live in the present and enjoy today more knowing that tomorrow is taken care of.

We all have our own unique challenges with saving money and keeping track of spending habits. It's important that you tailor your budget to your needs. When things get tough, remember why those financial goals are important to you.

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