Budgeting: Tips for
Beginners

Step 1: Calculate Your Income

The first thing to do is calculate your net income as it is the cornerstone of a successful budget. If you focus on your total pay rather than your net income, then you may overspend more than what you have. Make sure to keep thorough records of your contracts and payments to help you handle erratic revenue.

Step 2: Track Your Expenses

Determining where your money is going is the next step to consider. You may find out what you are spending the most money on and where you might be able to save the most by keeping track of and organizing the cost. Hence, make a list of your fixed and variable expenses. This may include expenses like

• Utilities
• Rent
• Mortgage
• Groceries
• Petrol
• Auto payments
• Entertainment and more.

You can use an expense manager app on your phone like Spendable to keep track of your daily expenditures.

Step 3: Set Goals and Create a Plan

List your short and long-term financial objectives before you begin going through the data that you have tracked. Though these do not have to be rigid, knowing what your goals are will help you to stay within the spending limit.

Then create a plan where you make use of the constant and variable expenses you gathered to estimate your future spending. Depending on your priorities and net income, you can establish a precise expense category.

Step 4: Adjust Your Spending and Review the Budget

After your income and spending are documented, you can make adjustments accordingly. Keep in mind that there could be a small amount of money that can add up to a lot of savings.

It is critical to regularly assess the expenditures as they may vary from time to time. However, make it a practice to review your budget regularly to stay on the budget.

1. The Envelope System

One of the first budgeting methods to employ is The Envelope System. It is a straightforward technique where you can handle personal money. To get started with this technique, all you need to do is

• Take a few envelopes
• Mark each one with a certain category of expenses like food, rent, loans, etc.
• Now fill them with the money you need to spend.

2. 50/30/20 Rule

The next is the 50/30/20 rule where you can allocate your income accordingly. You can start with allocating 50% of your income for necessities, 30% for discretionary spending and 20% for savings or debt repayments.

3. Zero-Based Budgeting

Zero-based budgeting is another way of budgeting that can be employed. It can start from a "zero balance" and allocate every penny towards a specific expense or savings goal.

4. Relying on Budgeting Apps

You can completely rely on a pro expense tracker app like Spendable. With the help of this budgeting app, you will be able to track spending, create budgets and set financial goals. You can also regularly monitor income and expenses besides getting a deeper insight into your finances.

• People often fail to monitor their spending habits. However, using an expense-keeping app can be done to regularly track the expenses.
• You may underestimate your expenses which leads to budget shortfalls. Hence, you can overcome this problem by overestimating the expenses for unexpected costs.
• Not reviewing and adjusting the budget can be a problem. Therefore, regularly review and adjust the budget to reflect changes.
• When you do not have an emergency fund, it lacks a cushion for unexpected expenses. Rather you should build emergency funds to cover such expenses.