For beginner budgeters, managing your finances can be extremely overwhelming. However, creating a budget is the first step toward financial freedom and stability. This is true no matter how much or how little money you have. Knowledge is power, and a budget gives you knowledge about where your money goes.
The amount of money we make tends to be tied up with a lot of shame. However, as an accountant, I know that finances are simply a math problem! Facing your finances can be daunting, but hopefully these tips can give you a helping hand.
Let’s take a look at my top 5 beginner budgeting tips and tricks.
1.Just get started
The most important step is to just get started. Your budget doesn’t need to be (and probably won’t be) perfect right at the start. And that’s okay! Budgeting is a skill, and everyone can learn this skill, but it takes time.
If you need a starting point, you could try these budgeting methods:
- The 50/30/20 rule. This is where 50% of your income goes to needs, 30% to wants, and 20% to savings and debt payments. These exact percentages may not work for you, so feel free to alter as needed.
- The envelope system. This is a little bit more of an old school method. You divide cash into different envelopes for different spending categories. You could modernize this technique by opening different checking accounts for each category and transferring money into them at the beginning of the month.
2. Save an emergency fund
Before you start putting extra money towards anything else, save for an emergency fund! Ideally, an emergency fund has a minimum of 3-6 months worth of expenses, but you can opt to save more.
An emergency fund protects you and the rest of your money from unexpected expenses like medical bills. It also acts as a safety net if you suddenly lose your job.
3. Track your expenses
An effective budget starts with knowing where all of your money is going in the first place! Tracking your expenses can help you identify areas where you may be overspending without realizing it.
To track your expenses, you could use a traditional ledger, a budgeting app, or a spreadsheet. Use whatever method works for you, but remember that consistency is key. Apps tend to work well because you don’t need to think about it.
4. Set up multiple bank accounts
Many people just have one checking account and one savings account. However, opening more bank accounts can actually help you achieve your savings goals!
For savings, consider opening savings/investment accounts for each savings goal. One for your emergency fund, one for retirement, one for saving for a house, even one for saving for a vacation.
Avoid putting all of your savings into one big account. This makes it easy for you to justify just “skimming a little bit off the top”. Specific accounts help keep you focused on your goals.
For spending you can also open up a few different accounts. One for fixed expenses like bills, one for essential purchases like food and groceries, and one for your “fun money”.
5. Give yourself a “for fun” allowance
Budgeting does not mean you can’t enjoy life. Actually, it’s quite the opposite. Think about budgeting as a tool for helping you enjoy life more and experience less stress about money.
You will not stick to a budget unless you allow room for fun.
No matter how much money you make, you should allocate at least a little bit of money towards guilt-free “for fun” spending. Spending some money on leisure activities or little treats will help you maintain the motivation you need to stick with your budget.
For more tips on accounting, real estate investment, and property management, check out Harry Paul-Emile’s blog.
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