If you want to achieve financial freedom, you must learn how to budget. Budgeting gives you a plan so you’ll know what to do with your money. It teaches you how to manage your income, expenses, savings, and investments. Having a monthly budget is a crucial part of life because it will give you leeway to have enough cash for the things you need and the things you want that uplift your life.
Following a spending plan will keep you on track as it will help you stay out of debt. Your budget will also be your ally to living your best life. When you are crafting a budget, you must consider these factors:
Keep an Untouchable Emergency Fund
Have a clear grasp of all the money coming in and all the money you need to spend on essentials like food, gas, and utilities. Anything extra must be set aside in your emergency fund. It should be untouchable because it is allotted for any untoward incidents like a health crisis, business issues, or even death. As a rule of thumb, be sure to have saved at least six months’ worth of your expenses. In case you lose your job, you can live in comfort while exploring your options.
Put a Buffer in Your Checking Account
Overdraft charges are a killer, so keeping a significant buffer in your checking account is crucial. It is vastly different from your emergency fund. When you are balancing your checkbook, pretend that this $1,000 (example figure) is not included. This amount ensures that you lower your stress level because you don’t have to worry about unforgotten checks and unnecessary bank charges that could eat away at your bank balance.
Be Vigilant in Tracking Spending
A lot of people make an estimated monthly expense list. Unfortunately, they leave it be and forget to track every penny. It is where it hurts because this kind of irresponsible behavior will creep up on you. These cents pile up daily, and it could surprise you how big they amount to when tallied at months’ end. Include your designer coffee, your lunch, tips, and everything else. You’ll be amazed at how much money you are losing. Being a vigilant tracker also makes you more accountable and responsible, so you are more adept at resisting temptation.
Learn to Adjust Your Budget
Knowing how to budget is not enough. It would help if you also learned to be flexible because life is not static. You must be as dynamic as the changes in your life. It is why it is crucial to track your expenses so you can make the necessary tweaks to our budget when your life situation calls for it. Kids get bigger, demands get more substantial, and life just happens, so you have to learn to adjust with the flow. Tracking and staying on top of your budget each month means you can make quick adjustments that won’t be detrimental to your financial health.
Save for Big Expenses
Life is meant to be lived and enjoyed, so do set aside for some fun money. You need to celebrate the birthdays of your loved ones and all the holidays like Christmas, Thanksgiving, New Year, Valentine’s Day, etc. You should also factor in vacations because you need it to de-stress from the doldrums of everyday life. All work and no play means you are setting yourself out for burn out. So do pay yourself, too, and have fun. You are working hard and keeping your budget in check so you can enjoy a good life.
You are the true boss of the money you earn. When you create a monthly budget, it is not a restriction. It is how you take control of your life. Budgeting is a tool that allows you to live your life well because it will enable you to see where every dollar of your hard-earned money is going. The only way to achieve true financial wellness is to be responsible with your spending.