A simple budgeting guide to manage your finances

Before trying to increase your incomes you need to learn about budgeting and how to manage finances.
Because let’s be real, there is no point earning more if you have bad financial habits. This is why creating and sticking to a budget is primordial for your financial goal.

Today, after many research, I will share with you basic financial tips to help you manage your money efficiently.

Why is budgeting essential ?

1. Helps you work toward your goals

Whether they are short-term or long-term, a budget will help you determine your goals and work toward them.

2. Ensure you don’t overspend

With today’s technology (credit cards) we easily spend money, and a lot of people spend money they don’t have by always using credit cards. A lot of people don’t realize they’re overspending until they’re drowning in debts. When you create a budget and stick to it you can avoid this. 
Checking in with your finances also helps ensure you will catch any bank errors or fraudulent transactions.

3. Helps you prepare for emergencies

You never know what can happen in the future. Having an emergency fund will act as a financial safety net.
It can differ depending on your lifestyle but ideally your emergency fund should be worth three to six months of living expenses

4. Make you gain financial awareness

Financial awareness is a must for those who want to reach their financial goals. Creating a budget forces you to look into your financial situation and learn how to manage your money.

5. Reveal spending habits

Building a budget will allow you to take control of your spending habits. This way you will notice where you are unnecessarily spending money.
Before deciding to buy something you can ask yourself “do I need it or do I want it ?”. You can also try waiting 24 hours to avoid impulse purchase and then remorse.

How to create a budget ?

1. Determine your income

The first step to create a budget is to know how much you earn each month. Start by calculating all of your monthly income. 
This is the key point to know how much you can spend and how much you can save each month.

2. Make a list of your expenses

Track your spending. Create a list of your expenses and categorized them into :
– Fixed expenses: rent; electricity; insurance etc
– Variable expenses: groceries shopping, doctor, veterinary cost etc

3. Needs vs Wants

It’s important to distinguish essential expenses and non-essential expenses as it will help you prioritize and save for a specific goal.

4. Set realistic goals

Whatever your goals, you can use your budget to work towards them. Whether it’s building an emergency fund, paying off debt, vacation or saving for retirement. Once you are clear with your income and your expenses you can assign specific amounts to each of your goals.

5. Adjust your budget

Divide your income into categories based on your expenses and goals. The most important thing is to spend less than what you earn each month.

As things change you might have to adjust your budget. Sometimes you will have to reduce your spending, other times you might be able to save more or spend more on things you want.

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Everyone has expenses they can’t avoid. Keeping an eye on how much you earn and how much you spend and staying disciplined, budgeting will be a powerful tool for you to realize your financial goals.

There are no strict rules when it comes to budgeting, just make sure to be realistic and honest with yourself and your finances.