Budgeting 101: 7 Simple Steps to Create A Personal Monthly Budget (and stick to it)
Source: Karolina Grabowska
What were your last month’s total expenses?
You probably can’t remember. Uhh … scratch that. You probably don’t know, and that’s why you’re researching how to create a budget. According to the Bureau of Labor Statistics, American households spent $61,334 in 2020 on average. And SWNS reports that Americans make an average of five impulse purchases a month.
Creating a budget helps you track your spending, block the holes leaking your money, and save toward your financial goals. Before we take a deep dive into how to make a budget and set you on the path to financial freedom, let’s first understand what a budget means.
What is a budget?
A budget is a plan that helps you track and keep a record of your income and expenses for a defined period. Creating a budget is a great step to being in control of your finances and building wealth or taking your personal finance seriously.
Well, budgeting helps measure your inflow and outflow to track your spending.
So why’s creating a budget important in personal finance?
If you’re like most youths, you desire to retire early (your 40s, probably) and have more than enough to travel the world with the love of your life. Now making lots of money isn’t enough to get you this dream life: you need a financial plan.
A financial plan is a strategy an individual develops to achieve their long-term financial goals. This is done by first analyzing your current financial status, future expectations, and risk tolerance, and creating steps to achieve your goals.
And one way to begin this journey is to develop a budget. To create a budget, you need your plan to be backed by data, not sentiments: else, you’ll be creating a wishlist. Here are the seven steps to creating a budget.