Budgeting is the first step to financial stability. Unfortunately, many people misconstrue budgeting as a tedious task involving complex calculations. However, contrary to its sophisticated name, budgeting is quite easy. It is actually a plan of how you are going to spend your money and how much you are expecting to save. In this article, we will give you some budgeting tips to easily make a budget and manage your finances in a better way.
1- Try out a Zero-based budget
Zero-based budget involves assigning a purpose or task to each dollar of your income. For example, if your after-tax monthly income is $5,000, you should divide it into different categories of expenses and savings. The zero in zero-based budget means that you continue to allocate your income to expenses and savings until your income is reduced to zero. This budgeting approach aims to put each dollar to use so that you could derive maximum benefit from creating a budget.
2- Consider a simpler 50/30/20 budgeting approach
If you think that budgeting is difficult, you can consider adopting the 50/30/20 approach to budgeting. It is a simple budgeting technique in which you divide your after-tax income into three categories: needs, wants, and savings. This approach proposes that you spend 50% of your after-tax income on your needs or essential items, and 30% on your wants (non-essential items), while saving the remaining 20%.
The approach is easier to follow as you can easily divide your income into these three categories. You are also allowed to spend 20% of your income on non-essential items other than 50% spending on your needs, which gives you a lot of room for spending.
3- Use mobile apps to make the budgeting process easier
Using mobile apps to record your day-to-day expenses and create a budget can be really helpful and make the process of creating a budget easier. Most of the apps available are easier to use, and the best part is that you can review your financial position at any time even on the go. With just a few taps, you can get charts and statistics about your current spending and your budgeted limits.
4- Review and revise your budget periodically
After creating a budget, you also need to periodically review it so that the budget continues to work for you even after your financial circumstances have changed. Your goals, income, or expenses might change, which requires you to update your budget accordingly to get the best results from it.
5- Account for unexpected expenses or emergencies
While preparing a budget, you should consider saving money for unexpected events or emergencies so that you don’t have to take out expensive loans. You should top up your sinking fund and an emergency fund for securing yourself in the event of any calamity. By saving money for the rainy day, you can save plenty of money in interest charges as well by avoiding loans.
Final Thoughts
If you want to streamline your finances, you should start with budgeting. Thankfully, budgeting is not as hard as you think it might be. There are plenty of user-friendly apps that you can use to create your budget. If you already have a budget, the tips that we discussed in this article can help you further improve it.
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