Kate Crowhurst
Bite-Size Read:
- A budget can seem like going on a restrictive diet.
- When done in a meaningful way, a budget can support you to afford your life goals.
- To help you get started, here’s our steps on how to budget in just 10 minutes.
How does the word budget make you feel?
Many of us hear the word budget and think restriction. It can feel like a restrictive diet for your money and can mean we avoid looking at our money altogether.
That might be why only 28% of us use a budget.
It’s also why in the same survey, 86% of people didn’t know how much they spend each month. Unfortunately, we’re not great at estimating our spending each month, so we have difficulty meeting our financial goals without a budget.
If we feel like a budget is restrictive, we don’t use it. And because we aren’t taught how to budget in school, it can seem a complex process. However, it’s easy to get started, and you too can get started with a budget with these steps.
Here’s how to budget in just 10 minutes:
1. Get clear on why a budget is important to you
Starting a budget can be difficult if you’ve not done it before. It can be hard to change some of the spending choices that aren’t making you happy but have become habits. Take the time to clarify why a budget is important to you and why you want to make this change.
2. Look at your past spending over the past 1-3 months
Budgets that don’t take account of what you are spending right now are bound to fail. Make a budget that reflects where you are now, look through your bank statements and write down what you spent money on over 1-3 months. If you can’t access your bank statement, start writing down what you spend in the next 30 days.
3. Figure out how much you earn
The next step is to work out how much you earn. We often know our annual salary but not the exact figure we earn each month. If you work for yourself, work out an average of how much money you typically bring into your business each month minus your costs.
4. Look at how much money you can save
At its most basic level, a budget is about saving money. How much you save boils down to your income minus your expenses or spending on needs like rent and wants like those new shoes you don’t need but can’t walk past. Save more by increasing your income or reducing your spending.
5. Identify your short and long term goals
It’s essential to have a goal in mind for the amount you want to save. It could be saving your emergency fund, contributing towards your retirement fund or saving up your first home deposit. Set some meaningful goals you want to achieve in the next 6 months and beyond. Frame these goals or resolutions by making them specific and measurable.
6. Select your budgeting method
You need to select a way to start budgeting your money. This could be a budgeting app, which enables you to remain conscious of your spending on the go. There are multiple types of apps to choose from and budgeting styles, such as the 50-30-20 method, which specifies you should save 20% of what you earn.
7. Review your progress regularly
Budgeting takes time to master. Take the time to look at how your current budget is working for you and make adjustments to it as needed. Progress takes time, so be kind to yourself and find the budgeting method that makes the most sense for you.
Making a budget is choosing to take control of your money.
Getting started with a budget can seem daunting if you haven’t done it before. However, by taking steps to learn budgeting, you can begin to plan where your money goes to help you afford your dreams.
Tracking spending: You’ll need to continue to keep track of spending to see if you’re sticking within your limits. When you link accounts with budgeting software, you can see right away where money is going and the app should generate reports showing whether you stuck to your budget. If you have a partner, you can hold each other accountable by working together to make sure you’re sticking to the spending limits you’ve set.