HOW TO MAKE A BUDGET: BUDGETING FOR BEGINNERS IN 2021

 Are you looking to make your first budget in 2021? This article on budgeting for beginners will help you learn the basics of creating your first budget. Whether you're looking to take control of your finances, pay off debt, or save money, a simple & effective budgeting system can help you achieve these goals.

You've probably heard that the first step to financial freedom is to create a budget. For beginners, setting a budget can be overwhelming, and it can sometimes seem scary. It doesn't have to be that way. Don't let these feelings stop you from being better with your money.

Making a budget that works is all about knowing how to start budgeting based on your current needs. While the basics are the same - knowing your income and tracking your expenses - every person or family is different, so you need to budget based on each person's needs.

I started managing our family finances a LONG time ago. Budgeting has taught me that it is possible to be more mindful when managing your money. My budgeting system is pretty simple and it works for me and my family. I constantly evaluate my budget to make sure I am on track and not overspending. This way I make sure our budget is working for our family.

BEFORE YOU START BUDGETING IN 2021

Set Goals.

Why do you need a budget? This is the first question you should ask yourself. Knowing why you need a budget can help you be more aware of your financial goals.

Whether your goal is to get out of debt, increase your emergency fund, or save for a major purchase, you will need to write down your financial goals. They will help you stay focused and remind you that there is a reason you are doing this.

Gather information.

Make sure you have the necessary information at hand. Bank statements (paper or online), monthly utility bills, pay stubs, hospital bills, and credit card statements are some of the documents you'll need to set up a budget.

BUDGET MAKING FOR BEGINNERS: HOW TO MAKE A BUDGET IN 2021

STEP 1: CALCULATE YOUR MONTHLY INCOME.

The first step in budgeting is to calculate your total monthly income. Include your total monthly income (and your spouse's, if married). Also consider sources of income from a side job, rental property, child support, etc.

All income received on a regular basis should be considered.

One thing to keep in mind is that if your income can fluctuate from month to month, it can make a big difference in your budget.

For example, if you are paid weekly or bi-weekly the same amount - say €1,000 - as the number of checks you receive per month is your total income. But what happens when the amount of each check you receive is different because you are paid by the hour or by commission? In that case, you'll need to take an average of your last three or four pay stubs and use that as your income.

STEP 2: LIST YOUR EXPENSES.

In this step, you will need to list all the expenses you have each month. Some expenses will be fixed (the same amount due each month) and some will be variable (changing each month).

To make sure you don't miss anything, check your bank statements for the last three months, average the amount of each expense, and note where your money goes.

Don't exclude anything from this category. Every expense you spend money on should be written down.

DETERMINE YOUR FIXED EXPENSES.

Fixed expenses are those where the amount you pay each month stays the same. Examples of fixed expenses are rent or mortgage, utility bills, cable, cell phone, internet, car insurance, etc.

DETERMINE YOUR VARIABLE EXPENSES.

Variable expenses are those that change from month to month. Some variable expenses include clothing, groceries, entertainment (eating out, snacks, movie tickets, etc.), fuel, home, and car maintenance, etc.

I know this step can be a bit tedious, but to make sure you have a realistic budget, you will need to list all expenses.

Positive balance: You earn more than you spend per month. Depending on your goals, it would be wise to add this extra amount to your savings or emergency fund or to increase your debt repayment (credit card, student loans, etc.).

Negative balance: You are spending more than you earn. In this case, go back to your budget and find ways to reduce or eliminate certain expenses. Your goal here is to have a zero balance in your budget, which means that your expenses (including your savings) match your income.

When you have a negative balance, I recommend reviewing your variable expenses and making some adjustments. Another alternative is to find ways to make extra money that will increase your income.

The key here is to know where you stand financially. By learning about your financial habits, you'll have a clear idea of the options you'll need to take to reach your financial goals.

STEP 4: EVALUATE YOUR BUDGET.

To make sure your budget is working, you will need to monitor and adjust it regularly. Depending on your schedule, review your budget weekly, bi-weekly or monthly. Many people make the mistake of setting a budget and forgetting about it, which is not wise at all.

There will be things that change over time in your life that will impact your budget. For example, your income may change, your financial goals may change, or there may be an unexpected emergency where money is needed. All of these things will have a direct impact on your budget. If this happens, your budget should be re-evaluated and adjusted.

THINGS TO CONSIDER WHEN CREATING A BUDGET.

There are different things to consider when setting your budget. Here are two of the most important things to consider.

INVOLVE YOUR FAMILY IN BUDGETING.

I am the person who manages our family's finances, but that doesn't mean my family isn't involved at all. I recommend that you involve your loved ones and talk about your family budget regularly. Together you can review your budget, evaluate it and make any necessary changes. This way, everyone will stay on track and achieve the same financial goals.

BE REALISTIC.

This beginner's guide to budgeting will help you be realistic about your financial goals and the impact budgeting has on them. Whether you want to get out of debt, save money or take control of your finances, setting a budget is your first step to achieving those financial goals.

Budgeting can be difficult at first, but if you stick to your budget, all your efforts will pay off!

This beginner's budgeting guide will help you budget with a clear goal in mind. Not only will you learn how to better manage your money, but you'll be one step closer to achieving your financial goals.

Do you have a budget? What other budgeting tips or advice would you add to the list? I'd love to hear your recommendations in the comments!