« Back to Blog
The best way to save: Making your first budget
If you're taking a road trip, you need a map to make sure you get there. If you're saving money for a particular goal - college class, a new car, paying off debt - your budget is your road map. It tells you just how much money you're spending and where so you can tailor your habits and reach your goals quicker. Without it, you're like a driver taking off on a cross-country trip without any guidance.
A lot of people don't make budgets and do just fine. Other people forego a written budget and struggle. The key takeaway is that anybody can improve their situation by using a budget. It puts all of your income and expenses in one place and allows you to study where you can save and how you can use cash from your job or making money online toward better things.
Here are a few tips about designing your first budget.
Tally up all your expenses
The key to a successful budget is knowing where you spend money in the first place. Over the course of a month, add up every expense you run into. Gather your bills first - cellphone plans, car payments, rent, credit card payments, cable and everything else. Estimate a rough average for what you spend on utilities. Do this by referring to the highest amount you paid previously for gas, water and electricity. This will give you a good idea for a worst-case scenario.
Write down all of these expenses in an itemized list and add up the total. This is the amount you must pay every month.
Next, add the day-to-day expenses into the mix. Make a section in the list for groceries, travel, clothes and everything else you spend money on. It's often helpful to make groups such as fast food expenses, grocery expenses, etc. for greater clarification. Record every place you money goes over the course of the month, track it in an itemized list and add it all up at the end. The sum of these two lists will give you a rough estimate of the total amount you spend in an average month.
Throw in what you're paid
After finding what you pay, you need to learn what you make from your job, paid surveys and everything else. This can be difficult for hourly and tipped employees. If you have records from previous months, use the information from the month you earned the lowest amount for an idea of a worst-case scenario.
Subtract your monthly expenses from your monthly payments to see how much money you save over that average time period.
Start moving items around
The power of the budget is finding where costs can be cut and allocated elsewhere. You may not have a choice when it comes to rent or car payments, but you can forego the daily cup of coffee if it's adding up to an astounding amount after a month.
Try to formulate a budget that saves a fair amount of money by the end of the month. This will give you some extra comfort if an emergency occurs or if you want to save up for something special.
« Back to Blog