Realism is the key to effective budget planning. It would be thrifty (but unrealistic) to live on $20 a week.
With a $20 per week budget, you are going to find yourself spending more than your budget. You might even over-withdraw from your account.
We’ll walk through three simple ways to set up a budget.
1. Keep close tabs on your finances at first
A lot of people like to sit down during financial crunch times especially and set unrealistic goals for how little money they can spend. Before you make a financial plan, observe your spending habits for one week. Track yourself for a month to get an accurate picture.
This way, you’ll include accurate amounts for expenses like gas and groceries, which might be hard to estimate, especially for those new to the world of budgeting.
Write down what you buy, how much you spend and when you buy it. Do not try to put on a good show for yourself.
Live as you did before you decided to create a budget. Observe yourself as you would another person, and record your actions.
2. Total up a trial period, such as a week or a month
Little expenses like takeout or pizza delivery can really add up and take a chunk out of your pay. When you’re able to see your spending habits divvied up by categories, it’ll give you a better perspective on how you handle your finances.
3. Figure out your fixed monthly expenses
Your first step towards budgetary discipline should be looking at your fixed expenses. You might be able to get away with spending a little less at the grocery store, but typically the amount you spend on gas is a function of the amount you drive to your job.
For that reason, gas payments should be in the fixed expenses column. Also, items such as rent, student loans and car payments would go in the fixed expenses column.
Once you have determined your fixed expenses, take out your monthly paycheck. Subtract your overhead costs from your pay. The remainder will be a very important figure for you moving forward.
You can consider saving a portion of what you have left over each month, or, if there is nothing left, you might consider looking into a higher paying job.
These tips are only useful if you act now. The sooner you change your habits, the more financially secure you’ll be.
If you haven’t already, it’d be a good idea to open up a credit card so you can start building a healthy credit history.
Photo source: telegraph.co.uk.
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