Imagine how good it would feel to know where every dollar of your income goes each month. If you haven’t used a budget in the past, this may seem out of reach. But actually, budgeting basics for beginners can make managing your money easier than you think.
Now is the perfect time to start. You don’t need any prior financial knowledge. You just need a desire to stay on track toward your financial goals.
Start today by making a list of your monthly income from jobs you do and any other sources. Then, make a list of everything that’s a definite expense each month. These are things like rent or mortgage payments, utilities, basic food needs and transportation, child care, and also minimum loan payments if you have any.
If there is money left over once you’ve accounted for those necessities, how do you normally spend it? (If you’re not sure, don’t worry. This is where a bit of easy detective work comes in.)
For the next four weeks, make a note each time you spend money (even on tiny things) or pay a bill. You can do this the old-school way, by keeping a little notebook handy and writing down each expense on paper. Or you can make a digital note on your phone or use an app designed to track expenses.
The RocketMoney and EveryDollar apps both have free versions and are recommended by the folks at the finance website NerdWallet.
Once you get a clear picture of exactly how much comes in each month and subtract the total you normally spend, you’ll know how much, if anything, is left over when the month ends. Tracking your spending is one of the key steps in learning the budgeting basics, as it sets the foundation for smarter money decisions.
If you have only a little left when each month ends, or you find that you’re spending more than you’re making, the next step is searching for expenses to cut and looking to increase the amount you’re bringing home.
To find expenses you can cut, check your debit and credit card statements. Are you paying for any subscriptions you don’t really need or apps you rarely use? Could you save money on food by bringing your coffee and lunch to work from home instead of buying coffee and lunch out each day?
If your mobile phone bill or cable/wifi bill is high, you can call up and try to negotiate a lower rate or ditch any services or channels you’re not using. (Switching providers can also be a money-saving option.) It also helps to have everyone in your household bundled together on the same mobile phone carrier.
If you currently have debt, you can also look into saving money by converting high-interest credit card debt into a fixed-rate personal loan. You’ll be spending less on compounding interest and you’ll know exactly how much your payment will be each month. (Got questions about that? It’s easier than you think and we can help.)
While cutting expenses, you can also look for ways to earn more. Is this a moment to talk with your boss about a raise or maybe launch that side hustle you’ve been thinking about? What if you took some new online classes, then updated your resume and started hunting for a higher-paying job?
One of the best things about budgeting is reaching the end of each month with extra money available. After paying for necessities, Nerdwallet.com recommends dividing any leftover money between savings, debt repayment and occasionally buying something you want but don’t need.
Once you’ve gotten in the habit of tracking your spending and you’ve made sure there’s some left over each month, you can choose what percentage of your extra money you want to put toward each of those things.
If you’re looking to begin putting money away, make this the year to learn more about saving. The Friendly Franklin Folks are always available to answer questions you have about saving, which you can begin doing with as little as $25.
We’re excited to help you make this your best financial year yet!