Budgeting

By Kaitlyn Szabo January 18, 2019

Why Should I Budget?

To effectively manage your finances, you need a budget. That’s what every personal finance blog, class, video, and professional will tell you. It is a fundamental component of finance, even if it isn’t all that fun. Budgeting for the first time feels intimidating and overwhelming. Where do you even begin?

The first step toward budgeting is to identify your financial goals. What do you wish to gain by sticking to a budget? Write down your goal and place it where you’ll see it often to help you stay motivated. Once that’s done, it’s time to build your budget.

 

What Should I Include in my Budget?

Use your current financial statistics (how much you make, how much you spend to cover your needs, how much you invest in savings, and how much goes toward your wants) to build a realistic, workable budget.  

You can find these figures by tracking your income and spending. Choose a tracking method and figure out everything you make, spend, save, and invest in a month.

  • Use pay stubs, benefits statements, and other income records to track your earnings.
  • Use receipts and other spending records to track every expense (no matter how small).
  • If you have irregular income, do these steps for a high-earning and a low-earning month.

 

How Do I Stick with my Budget?

Budgeting is a continuous, active, and personal process. If this is your first budget, think of it as a 3-month trial. After a few months, reevaluate your budget and make adjustments. Be sure to set aside time to review your budget annually.  

  • Always keep an eye out for opportunities to add income in the form of a part-time job, seasonal employment, or other means. Be realistic and kind to yourself if working more isn’t a possibility.
  • Make a “hierarchy of wants” to reduce spending on non-essentials.  First, identify what items are necessities and what are extras. Now, list out all non-essential expenses by preference. Substitute the lower ranked items for cheaper alternatives or eliminate them.

 

You Can Do This!

Remember: Your income and spending habits are NOT reflections of your character or your capabilities. Your budget does not define you.

If you want more assistance with building a budget, don’t hesitate to reach out to one of these organizations working to help Minnesotans improve their finances.

 

Money Management E-Newsletter: January 2019