11% of Canadians are currently spending more than their paychecks. This means that they’re losing money every month, often as a result of the ever-increasing cost of living. Can you relate?
It’s time for you to create a monthly budget plan so you can get on top of your finances. The experts at Teka Loan are here to help. Read on to learn how to make a budget for your lifestyle.
Start by Tracking Your Spending
Before you can effectively create a monthly budget plan that’s going to work for you and your lifestyle, you need to know how much money you’re currently spending.
Often, people only have a vague idea of what they spend every month. You may be spending more or less than you think, and it’s tough to make adjustments if you don’t know your starting point.
Track every purchase you buy for an entire month. This is going to be a tedious process, but you only have to do it once. No matter how small the purchase is, write it down somewhere.
You can use apps or write everything down on paper. Do what works best for you.
Don’t forget to note down tiny purchases like snacks. You should also check all of your subscriptions and memberships. These small monthly costs add up, and if you don’t account for them, you may find yourself going over budget.
If you have any loans (online loans, installment loans, student loans, and others) you’re paying off, you need to factor those in as well. They won’t be part of your budget forever, but at least short term, you need to know that they’re there.
Map Out Expenses: Wants vs. Needs
Now that you know how much you spend during an average month, it’s time to map out your expenses as they compare to your income.
Divide your expenses into “wants” and “needs.” When you make your budget, you’re going to devote money to the “needs” first. “Needs” will also include any bills or debts, even if they’re not explicitly necessary, because you have to pay them off.
“Needs” also include basic food and other necessities like toiletries, cleaning products, and basic clothing. Anything extra (like sweets or brand-name clothing, for example) will go into “wants.”
Look for where you can cut down. For example, you may find that you’re paying for more “wants” than is strictly necessary, so you may be able to cut down by shopping during sales or cutting out certain things altogether.
See how your expenses compare to your income. How much money do you have left over after your wants and needs are taken care of? That’s the money that should go into savings.
If the leftover money seems sparse, you know you need to cut down. There are plenty of ways to start saving money.
Set Realistic Goals
Now it’s time to set goals. Based on your current income and expenses, what’s next for you? What are you budgeting for?
You can (and should) have several goals. If you’re on a tight budget, one large goal and one small goal should be enough. If you have ample extra income, set several large, small, and medium-sized savings goals.
For example, you may be creating a personal budget so you can start setting aside money for a house. This is a large goal.
While you’re doing that, you might want to also save to take a small weekend vacation with your friends or family members. This is a small goal.
Goals give you something to work toward. When you create a budget with no goals, it’s harder to stay on track. Giving yourself clear goals (and tracking your progress) feels like “gamifying” the process, which can make it more fun and fulfilling.
Consider Different Budgeting Options
When you read about creating a monthly budget, you may come across the 50/30/20 approach. About 50% of your money goes to needs, 30% to wants, and 20% to savings. This is a great option that works for many people, but it’s not the best choice for everyone.
Not everyone has 20% left over after their needs are taken care of, even if they cut back. Those people should be trying to find new income sources, but that isn’t always an option.
On the other side, some people have far more than that left over after they’re done with their needs and wants. In that case, they should send more than 20% to savings and investments.
You need to find a budgeting plan that works for you.
Some people aim for a zero-based budget, meaning that every cent goes toward something by the end of the month, leaving them with nothing left (but don’t worry, that means that money is going into savings and investments).
Others prefer a cash-based budgeting system in which they take out cash, put it into envelopes, and pay nothing on a card so they know how much money they have available at all times. This is great for people who struggle with digital spending.
There are many options. Don’t stick with one that doesn’t work.
Once you’ve created a budget, you need to keep track of it. Track your spending and see if your new budget works. You may find that you were overzealous with cutting expenses and you have to add more money to your “needs” or “wants” categories.
You should also actively be putting money toward each savings goal, even if that means starting mini-savings accounts for each one. This can be time-consuming, but it’s worthwhile.
You Can Have an Effective Monthly Budget Plan
Money management can be challenging! Starting a monthly budget plan is a great way to get on top of your spending so you can set yourself up for financial success.
At Tekaloan, we love giving practical financial advice to our customers. If you need more financial tips or you’re looking for fast loans in a pinch, check out your options at tekaloan.com.