Budgeting might sound scary to you but let me tell you it is the most powerful and simple tool to manage your finances. A budget is a safety net that helps you to stay on track whether you are planning for your dream vacation or tackling debt. Budgeting can make it easier to save money for your goals and help you to feel more control over your finances. It works as a map which helps you to decide where to go and where it is going. You must be wondering what the budget process should be. How to begin it? In this blog, we will go through how you can start budgeting tips for a beginner.
Budgeting process step-by-step guide:
Step 1:
Determining your monthly income is the first step of the budgeting process. The income that you are getting after all taxes, find out how much you are getting each month. Include everything your salary, any freelancing income if you are doing it, or any side business.
The foundation of your budget preparation only builds after knowing your total income. It is always a better idea to underestimate than even the slightest overestimate. This makes sure you don't overspend your money.
Step 2:
Your next budgeting process should be listing your monthly expenses. Write down even your smallest spend of every month. You can do this by splitting it into two main categories: Fixed expenses and variable expenses. The fixed expenses are those that are fixed every month like your EMIs, house rent, insurance, and loan repayments. Variable expenses are those that can change every month, for example, utility bills, entertainment, travel expenses, and groceries.
It's very common to miss out on small purchases like buying some random kinds of stuff or going out with friends but these small purchases can add up quickly. To make sure you don't miss anything carefully review your last few month's bank statements.
Step 3:
Categorizing your expenses is the next important step of your budget preparation. This will help you to analyze your spending habits example travel expenses, food expenses, housing, and leisure.
Then analyze if your entertainment budget is more than your savings. Are you spending more on restaurant bills than grocery? Once you categorize it will be easier for you to spot the areas where you can cut back.
Step 4:
Now comparing your income with your expenses is next for the budgeting process. Congratulations if your income is higher than your expenditure, you have a surplus. Now you can put those extra funds on your savings, investing, and paying off debt.
But in case your expenditure is more than your income then it’s time to re-evaluating your financial habits. But don't worry with little adjustments on your expenses you can be back on track. You can start by cutting unwanted expenses like eating out or your binge-watching subscriptions. The goal should be to manage your expenses so that they don't exceed your monthly income.
Step 5:
Choosing your budgeting method, a method that suits your lifestyle and financial goals is the next budgeting tip. Here are a few popular options:
The first is a zero-based budget, which gives purpose to your single penny. Once you allocate all your income to savings, debt, and expenditure your balance should be zero.
The popular method of budgeting tips is the 50/30/20 rule. This popular yet simple formula in which 50% of your salary goes to your basic needs, 30% of your salary goes to the things that you want, and 20% of your salary to your savings and loan repayments.
Decide a fixed amount you want to spend on something once it's empty you are done no more spending in that category. Try these methods and find out which is working best for you.
Step 6:
Tracking your spending is another next important step of budget preparation. Creating a budget is another thing and sticking to it is another. Most people create their budget but fail to stick to it. So if you keep tracking your spending it will ensure that you stay on course.
You can use Excel sheets and budgeting apps, or you can also use the traditional approach by writing on pen and paper. The goal is to record every purchase even the smallest. This habit will help to analyze your spending and identify your problem and area of adjustment.
Step 7:
The last and final step of the budgeting process is reviewing and adjusting your budget regularly. Your budget should be flexible enough to adjust and adapt to changes in your circumstances. Imagine you got a hike. Great news right now you can pay off your debt faster or cover your unexpected expenses.
Make sure to review your budget monthly so that it can align with your goals. These regular checkups will help you to stay in control of your finances and accommodate the budget accordingly.
Final Thoughts:
The budgeting process may appear hard at first, but it is an excellent approach to manage your funds and work toward a goal. When you start tracking your income and expenses, you will gain more control over your money. If you want to manage your funds with more flexibility, Viva Money can assist. It will provide a line of credit up to Rs 2 lakh with 0% interest for up to a 51-day grace period, you can obtain the required amount without any additional strain. Begin a financial plan today and support your journey with a dependable loan from Viva Money.
