budget

How to Set Up a Budget For Your Salary

Do you know where all your money goes? Or does it just disappear from your account? A simple budget is one of your best options to ensure that you are spending less than you earn. Starting as soon as possible to do this is very important. When you are young, and your career is still new, you won’t have a lot of money. Making a habit of categorizing your bills, tracking every expense and cautiously watching where your money goes will prevent you from getting into a financial catastrophe. If you are preparing a budget for the first time, starting with a calculator, pen, and paper is more comfortable before you start making use of advanced tools.

Budget Creation

You can start with your monthly income. Hold your monthly income in memory, and then list out your personal expenses. This will include your rent, electricity bills, and other payments. But for other things that aren’t very straightforward like food, you may have to track how much you spend over time. Gather up your receipts or a compiled list of purchases. If you are unable to obtain a precise figure for some of the purchases you made, then you could generate an estimate for the time being. Track all of your expenses for the next couple of months. At the end of each month, sum it all up to see how much you are spending on those different categories.

The ideal amount of money you spend in a period of one month should be lower than the amount of money you earn. If it is not, then you need to look at your lists and cut some things out until it is. If you must, then ruthlessly remove things and don’t forget why you are doing that – to save money. For you, it may be having to cut off those treats you reserve for yourself. Sometimes it may be big plans you’ve made.

Budget Categories

Once you’ve got the hang of that, you can create your budget based on how you frequently spend money. Different people have their own opinion on what they want their budget to look like. Being too strict with how you spend money is not a sustainable path to follow. Instead, divide your money into different categories.
  • Fixed costs: Fixed costs should include costs that arise from consistent expenditure that rarely change.  This includes and is not limited to rent, electricity, phone, gas, and others. The figures for some of these may vary from month to month. But, the amount is usually predictable, and the difference isn’t so great.
  • Savings: Short-term and long-term savings would go in this category. This category includes saving up money for trips, holidays, or for any significant purchase like a computer. You can include your emergency funds in this category.
  • Investments: As you build savings, you’ll want to invest some money so it can grow over time.
  • Guilt-free spending: This category contains anything you want. Party events, movies, dinner, and general splurging goes in this category. As long as the other categories are well balanced, this category can be used for entertainment vices which you won’t feel guilty about.

How you share your money and put them into these categories is entirely up to you. The amount that goes into fixed costs is usually larger than the rest for most people. Some people prefer not to splurge as much, which is not a bad thing. Remember, the more you save, the sooner you can get yourself something big like a house or a car.

In the end, budgeting is the same as planning ahead and knowing where your money is. Deciding on what to place in which category may be all you need to do and how much to place in those categories. The more you save for yourself, the better.

 

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