Creating a Budget For Beginners 2021: Starting a Budget and Budgeting Tips for Beginners
Here's a video about creating a budget for beginners in 2021! I'll go over my method of budgeting and giving some tips to get you started! Feel free to add me on instagram: @kikoga
So as with anything in life, we as humans need a sense of direction and it is the same with budgeting. Think about what you are budgeting for, and the goal needs to be SMART, Specific, Measurable, Achievable, Relevant, Time Bound. Saying, I want to save $60,000 dollars in 5 years so I can put a 20% downpayment on a $400,000 home is a SMART goal. But then I take it one step further. I would break any financial goal to a monthly or weekly time frame. So the next step in the SMART goal of saving 60,000 in 5 years breaks down to $1,000/month.
So, say this person is making $33,000 after taxes which breaks down to $2,750/month. And now, you START your budget by subtracting your budgeted goal of $1,000. Start with our goal and see what is left over AFTER saving. So $2,750 minus our goal of $1,000 gives us $1,750. And then we look at fixed recurring costs. You have to sit down and really think about this for yourself as it can be very hard to see your future happiness and relate it to how you are feeling now. In this case, my suggestion would be to keep the budget as is, and if you want to increase your food, living and entertainment budgets, you need to find a way to increase your income instead of cutting saving by either working harder at work to get a raise or promotion, or creating a side hustle to generate extra income.
So now that you have your budget set up, here are some budgeting tips that I personally use that help me stay on track with my goals and help me save my money.
Track your expenses
Awareness is key when you are first starting a budget. Also, if you go through the effort of tracking all your expenses you’ll be less likely to stray away from your goal since you already you went through the effort. I typically try to look at this on a weekly basis and put it in an excel spreadsheet and categorize it. I update this weekly just to solidify what the numbers are and make sure I’m tracking towards my goal at the end of the day. There’s also an app I have used called Daily Budget that basically you put in all your monthly/yearly numbers and it automatically calculates a daily budget for you that you can input every time you buy something to see how that affects you daily.
Cut Down On Unnecessary Expenses
Once you have a month or two of tracking your expenses you can take a look at where you can cut down. And think about whether these purchases are helping or inhibiting you from reaching your ultimate goal. This may even involve moving back home with your parents to save money on rent! I know for me, a huge reason why I was able to save most of my income early on was that I was living at home from the age of 20-25 which helped me buy my first home. And while you’re cutting down on expenses, that doesn’t mean that you cannot have fun!
Plan your meals
This is usually a big one for me, a lot of times I work late, and if I don’t already have a plan or meal waiting for me at home, I tend to go out and buy something. This also helps when you are grocery shopping, if you’re prepared enough, you can plan your meals to the coupons that each market is advertising. Also, if you have a list prior to going to the market, your trip is more directed, so you won’t go perusing through the aisles trying buying potentially unnecessary items. Now, eating out and being spontaneous once in a while won’t hurt, but I would say it would be good to have at least 5 out of the 7 days already planned and prepared.
Operate with cash
And if the above is not working, then the best thing to do is to just make all purchases with cash. It’s a tangible item that you can clearly see when it is depleted and one of the most fool proof ways to stick to a budget. I would highly suggest that you try your best to have the discipline to not have to use this tool so you can make use of benefits like credit card points and such on your purchases, but if you are just having so much trouble sticking to your goals, the saving is more important than those points.
Don’t stress yourself out
And finally, don’t stress yourself out. There’s a fine line between being diligent with your expenses and being so obsessed that its affecting your emotional and mental well being. If you’re trying to be so tight on your budget that you aren’t going out, you’re working so much you don’t see your friends and family, and you’re unhappy, then reevaluate and make sure you are not letting your budget run your life. No one is perfect, and there will be times when you overspend and that’s okay, as long as you stick to it majority of the time! I like to think of it more as a game for myself than anything, and maybe you can have that same mindset to to keep this fun!
