If you’re out to sea with your finances, then the concept of a budget is just going to feel even more foreign.
You’ll assume they’re restrictive, hard, or both. But creating a spending plan is an excellent reframe that feels like a more flexible way to manage your finances.
Here are five ways to create one that works for you.
Know Your Numbers
There’s no managing your money if you have no clue where it’s going.
The first and most important step is to research yourself and your spending habits. Learn what’s coming in and what’s going out before you even bother changing things. Go through every single expense and use whatever works for you (apps are great, but a pen and paper are just fine) to record your decisions.
Know Your Needs vs. Wants
Once you have a clear picture of your spending, you can start to organize it. This is where you separate your “needs” from your “wants.” Your needs are the expenses that keep your life from going off the rails, like rent, groceries, utilities, and debt.
Your wants are everything else, like having a pizza delivered because you’re tired from work or buying a new video game, even though you have an insane backlog. Cover your needs first, then allocate the rest to wants as you see fit.
Find What Fits Your Life
This plan should fit your life, not someone else’s. Look up some popular ways to budget and see what makes the most sense for you. Many people love budgeting apps since they can track their spending automatically by connecting to their bank account.
Yet others like the tangibility of writing things down in an old-school ledger. Neither approach is better than the other; it’s all about making it make sense for you (and swapping to something else if you realize it doesn’t).
Make Way for Fun
You won’t stick to a spending plan if it’s too strict. Not only that, but every good budget has a focus on fun somewhere, even if it’s a catch-all category for discretionary spending. You should always set aside cash for doing things like going to a concert or out to dinner.
You can always separate these into separate categories if you’d like, but contrary to popular belief, budgets are not ways to restrict your spending. They’re meant to give you perspective on your spending so you can enjoy things like these without guilt.
Check In and Adjust
Life changes, and your spending plan should too. Your income might go up, or you might have a new expense come up, like a medical bill or an unexpected car repair. A good spending plan isn’t a one-and-done deal. You should check in on it at least once a month to see how you’re doing.
Are you consistently overspending in one category? Do you have extra money to put toward your savings goals? Making small adjustments along the way will ensure that your plan remains relevant and effective.
