By: Maniyah Goodwine
Budgeting is a necessary skill at any financial stage. Budgeting gives us a clear overview of our spending habits and can be especially useful when looking to take on a new financial endeavor, such as moving out or buying a car. In order to live life on a budget you must first know how to budget. Here is a guide to get you started:
- The first step of creating a budget is to outline. Here you should begin listing all of your necessary expenses and pair them with how much income you have for the month. These expenses are usually fixed and don’t change from month to month.
Examples of income: wages earned from employment, gift money, other assistance (money/support from family members)
Examples of expenses: rent/utilities, student loans, insurance, phone/internet
- Then, total your expenses and subtract them from your total income for the month. Doing this will enable you to see what money you have left over in your budget. This left over money can be used for things like entertainment or going out with friends. With this left over money you should also save a portion of it to have in case of an emergency. You never know when your car will break down or you will be temporarily out of work.
- Making a visual representation of the money you have can really be an eye-opener as to how you can make your money work for you. It can show you where you should hone in on your expenses. Here is a sample pie chart representation of a budget with an income of $1,000.
- Now that you can see where you have free money or where you are overspending, you can adjust your budget. For example, if you feel like you could use more money, you could cut back on something like phone and internet services. You can use the left over money to treat yourself to some new clothes or buy tickets to the show you’ve been wanting to see.
While using your extra money for the month is nice, it is something that has to be done in moderation. A portion of the money left over after paying your bills should be saved or invested.
Having a budget in place can help you take control of your finances.