The first step towards being financial independent is learning how to create a budget. It may seem daunting (and slightly boring) if you're just starting. But don't worry – gone are the times where you need to slave away over an Excel spreadsheet. ❌
You don't need to be an expert in finance to begin. In fact, how to start budgeting is pretty much as straightforward as following the easy, practical steps we'll touch on in this blog.
Understanding Your Income
Let's Talk Money
Before diving headfirst into how to start budgeting, it's important to have a clear understanding of how much money you have coming in. This might seem elementary, but lots of us overlook this step. Your total income includes not just your salary but any additional revenue you have. It could be a part-time job, freelance work, or maybe income from an investment. 👀
Knowledge is power, and in this case, knowing exactly how much money you're working with each month is the first step in taking control of your finances. 💪
Identifying Your Expenses
Know Where Your Money Goes
So now that you've figured out your total income, it's time for the second step on how to start budgeting: identifying your expenses. This includes everything you spend money on, from rent and utilities to groceries and entertainment. Takeaways and brunch dates… the list goes on.
You can use online tools, apps, or even just a good old-fashioned spreadsheet to track your expenses. Just make sure you differentiate between your fixed expenses (like rent and car payments) and your variable expenses (like groceries and entertainment).
✨ Want an AI money app to do it for you? ✨
Setting a budget with Cleo is easy and she won't cost you a dime.
How to get started:
1) Get connected 🤝 – Download Cleo, sign up, and connect your checking account.
2) Income 💸 – Select your latest paycheck(s) so Cleo knows when you get paid
3) Bills 👀 – Add your bills and double-check to see if they’re right so they can be tracked correctly
4) Spend limit 🥡 – Set a realistic spend limit
Each month, she'll show you how much money you’ve got coming in and how much money you’ve got going out. Cleo will also alert you when your bills are due and how much you’re spending on certain categories including:
🏦 Bank charges (you totally suck)
For more tips, check out How to Make a Budget With Cleo.
Setting Your Financial Goals
Dream Big and Set Goals
Now that you have a clear picture of your income and expenses, it's time for the exciting part of learning how to start budgeting: setting financial goals. 💖
Perhaps you want to save for a vacation, pay off debt, or start building an emergency fund. Whatever your goals may be, aim to make them SMART. Specific, Measurable, Achievable, Relevant, and Time-bound.
Setting financial goals not only gives you a roadmap for your budget but also gives you a bit of motivation. It's a lot easier to skip that extra coffee when you're picturing yourself on a beach sipping cocktails. 🍸
Creating Your Budget
A Plan for Your Money
There are several different budgeting methods you can use, such as the 50/30/20 rule or zero-based budgeting. The key is finding a method that works for you and sticking to it.
Remember those fixed and variable expenses we mentioned? Here's where they come in. Fixed expenses are the first thing you budget for, followed by variable expenses. The remainder can go towards your financial goals.
PSA: Remember Cleo can help you create your budget if you'd prefer an easier and fun way to do it. 🚀
Sticking to Your Budget
Consistency is Key
Creating a budget is one thing; sticking to it is another. This is the most challenging part of learning how to start budgeting. It's easy to be persuaded into going for that extra brunch each month or splashing out on a shopping spree and buying clothes that'll probably just sit in your closet and be forgotten about. 👀
The key is to start small and not to be too hard on yourself if you slip up. Remember, budgeting is a marathon, not a sprint. One dollar at a time. 🙌
One tip is to make sure your budget is realistic. If you love going out to eat, it's probably not realistic to cut that expense completely out of your budget. Instead, try reducing it and finding cheaper alternatives.
Reviewing and Adjusting Your Budget
A Living, Breathing Document
One common misconception when people start budgeting is that a budget is set in stone. News flash: it's not. A budget changes as your life and financial situation change.
That's why the final step in learning how to start budgeting is reviewing and adjusting your budget. Maybe you've found that you're consistently spending more on groceries than you thought. Or perhaps you've received a raise at work (woo, yeah). Whatever the case may be, adjust your budget when your financial situation changes.
You've Got This
By now, you should have a clearer idea of how to start budgeting. Remember, it's totally normal to start small and make adjustments as you go. The most important thing is that you've taken the first step towards financial independence. 🏠
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Big love. Cleo 💙