Making a budget and sticking to it is the first step towards reaching your financial goals. Learning to make a budget at home is a great skill to have and keeps your expenses in check. Research shows that people who make and follow a budget are less prone to finance-related stress. So, if you wish to learn how to make a budget easily and stick to it, go through this step by step guide to get yourself started.
Understand your Income
If your only source of income is your after-tax salary, then this section should be pretty sorted. However, if you have other sources such as interest, or rental, it is good to have clarity. Also, remember to transfer at least 20% of your income to a savings/investment account before using the rest to make a budget.
Understand your Expenses
Making a budget is all about understanding and controlling your expenses. You can use 'Chat with Nerd' to keep track of your expenses easily. All you need to do is send a text on the app mentioning the amount you spent, and the thing you spent it on, and the app will automatically add that expense to the relevant category. You can check how much you have spent on any particular type like travel, food, etc.
Manage your Expenses - Now that you are aware of your income and expenses, it is time to manage your costs to meet your financial goals. Divide your expenses into broader categories like rent, food, outings, etc. Then, assign an amount that you seem fit to it. You could look back at your previous month's spending habits to better understand where and how you spent your money. This could help you decide how much you wish to assign to each category. Remember that this is a self-improvement exercise, and whatever decisions you make are supposed to be relevant to your wishes and dreams. There are no hard and fast rules on how to make a budget; it is all about finding your perfect recipe.
Review it regularly - Once you have made a budget, it is crucial to make sure you follow it. The first budget that people make is often not a great one. Since budgeting involves a lot of estimation, it is natural for people to sometimes over/underestimate their needs. After making a budget, the final step is to review it regularly to understand how much it is in sync with your lifestyle. You might have added a certain amount for food; however, as days pass, you might realize that to maintain the kind of diet you wish to, the given amount is insufficient. It is essential to regularly review your budget to find out such problems and fix them either by changing your spending habits or by changing your budget. With enough reviewing, you should finally be able to make a daily budget that works perfectly.