If you want to become a financially sound individual, you have to understand the importance of a quality budget. A budget will keep you on track for the type of lifestyle you want to live and, hopefully, prevent you from overspending. Whether you decide to create a budget to save for a dream vacation, pay off bills, or free up more money for investments, it’s essential to stick to your plan. Below, we discuss a few key steps on how to create a budget for your lifestyle.
Figure Out Expenses
When you first start budgeting, your initial step must be to calculate your expenses. Determine what you’ve spent money on in the past six to 12 months. Some monthly payments are set—your rent, loan and car payments, utilities, and the like. Other expenses, however, may be a bit more intermittent, so take a look at the past six months and get an average of those costs. You should also include any unexpected expenses that may occur and set aside money for those as well.
Once you’ve looked at all those numbers, add everything up and then divide that figure by 12 to figure out your average monthly expenses. This number will be your baseline for budgeting.
Determine Your Income
After you’ve figured out your expenses, your next step is to determine your income. This can be a bit more difficult for people whose incomes fluctuate each month. Do your best to set a solid number that encapsulates your annual income. That means including any extra funds you receive besides your annual income, such as cash gifts, alimony, interest, investment earnings, and rental income.
The most important part of creating a budget that fits your lifestyle is setting financial goals you hope to achieve. As we mentioned above, you may be saving for an engagement ring, a car, or a dream vacation. Whatever your motive is, set a goal, and then determine how much you can set aside to save for that goal. Make sure it’s a reasonable amount—you must continue to pay attention to your expenses and monthly needs.
Track Your Spending
Next, quite simply, you need to track your spending each month. If you go out for coffee every day, track how much you spend on it. Every detail matters. The more you track, the easier it will be to notice the things you’re spending too much money on.
When you track your spending, you’ll notice areas in which you should adjust your spending. For example, maybe you notice that you spend a lot more money when you have cash on you. You can adjust that habit by investing in a small chip wallet that only has space for credit cards. Likewise, if you notice you’re maxing out your budget on coffee, start making coffee at home. Make adjustments to fit your goals!
People often create budgets but then don’t follow through with it as the months go on. One of the most important things you can do to live the lifestyle you deserve is to follow through. Don’t stop budgeting after a few months because you think you’ve got it covered. If you really want to save for those goals, then you need to constantly keep your budget in mind, no matter how long you’ve been saving.
When it comes to finding the right wallet to fit your lifestyle and help you on your path to sticking to your budget, turn to Ekster. We have what you need to reach your dreams!