Budgeting for beginners can seem daunting, but it doesn’t have to be. It will help if you make this a practice in your daily life. Starting it late might cause you more of a problem. Latest statistics show that financial literacy in Australia has dropped by almost 10%, as discussed in Financial Standard
There are simple steps you can take to get started and make sure you’re on the right track. From setting goals to tracking spending, here’s a look at how to get started budgeting
What is budgeting?
A budget is a system to monitor and track how much income you receive versus the amount you spend. A budget is imperative to keep track of your limits while also saving toward financial goals in an organized, stress-free way.
Getting Started with Budgeting
Determine Your Goals
Make a list of your goals. Write down what matters to you, and then put your values in order. Know why you are working in the first place. Do you want to pay off that debt? Prepare funds for your family and kids? Save for a down payment on a home? Afford your dream vacation? Retire Early? Whatever goal you have in mind, make sure you focus on that so you will be more driven to accomplish those goals. And the best way to start is to track your financial activities with a budget.
How to Make a Budget?
The first thing you need to do is to compare the ins and outs of your finances monthly. An excellent way to view this is to look at past bank statements, which have both a credits & debits column.
Step 1 – Determine your Income
Before calculating amounts, you must identify all assets and liabilities. It is best to consolidate documents or any trail of your income and expenses.
How much income can you expect each month? If your income is in the form of a regular paycheck where taxes are automatically deducted, then using the net income (or take-home pay) amount is fine. But if you are self-employed or have outside sources of income, such as Centrelink payments or hobby money, be sure to add that to your budget.
Step 2 – List Your Expenses
Review your checkbook register, credit card statements, store receipts, and more. Where is your money going? Here is a categorized list that could help you identify your list of expenses:
1) Fixed expenses are bills that do not change monthly, including rent, renters insurance, mortgages, home & life insurance, and debt repayments.
2) Inconsistent expenses include utilities, groceries, and other obligations that change due to subtle variables that can occur in day-to-day life.
3) Discretionary expenses, like apparel and entertainment, are considered optional expenses.
Step 3 – Create Your Budget
Think of it as your spending plan. Your budget should meet your “needs” first, then the “wants” you can afford. When we say you can afford it, it is to avoid credits or live within your means.
If your income is insufficient to cover your expenses, adjust your budget by deciding where you can cut costs. Ensuring you are within your budget will save you from financial stress and a low credit score.
Step 4 – Check Back Periodically
Like any other plan, it should constantly be checked to gauge if it works for you. Because if you need help with budgeting and tracking your expenses, then seeking help from experts like FIFO Management would be the best thing you can give yourself.
Final Thoughts
Having a clear financial plan or concrete budget as part of your monthly financial practices might be challenging, but it will surely lead you to the goals you want. It will help you avoid falling into deeper financial problems in the future.
It’s always good to give yourself something to accomplish. It doesn’t have to start with something huge, but a simple on-time payment of bills, good credit standing, and small savings from your paycheck will go a long way as it progresses.
Keep in mind that all big things start with something small and simple.
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