When I first graduated from college, having never even thought about budgeting, I was faced with many unknowns. Once I started earning a salary, I had no idea how to manage my money. I thought to myself, “Hey! There’s money in my bank account. I guess that means I should spend it.”
Spending carelessly, of course, soon came to be a fairly unsustainable practice, one in which I began the sick cycle of living paycheck to paycheck.
When I decided that I needed to start budgeting, I had no idea where to begin. After many months of trial-and-error, I’ve learned that all budgets no matter what you’re saving for or how much money you make– have a few basic components:
1. Tracking your spending habits helps identify where you can cut down.
The only way to change how you spend your money is knowing how you spend it in the first place. Budgeting is essentially a reformulation of Socrates’ dictum, “Know thyself.” We are all an agglomeration of various habits. Tracking your spending habits by writing down every expenditure, whether it’s on a sheet of paper or using computer software will enable you to identify patterns so that you can cut down on expenses you can do without.
2. Mapping out long- and short-term goals enables you to determine what you want and how to get there financially.
What is it that you want from life? Whether you are saving short-term for a specific vacation, or you want something more long-term, like furthering your formal education, you should note what you are striving for when you budget and save. Identifying life goals will help you stay motivated to get your finances in order.
3. Understanding what you are willing to sacrifice creates a budget that balances needs and wants.
Budgeting isn’t always about sacrifice, but sacrifice does play a key role. If you have a better understanding of what you are willing to give up in order to save for your future, then you’ll more willingly change your lifestyle to meet your goals.
4. Knowing that not all budgets are perfect motivates you to keep on budgeting.
Budgeting isn’t merely a matter of drawing up a plan and strictly adhering to it. If it were, then there wouldn’t be so many blogs out there advising others how to go about their personal finances. Budgeting, like dieting, is something that takes sustained practice. Knowing that everyone has occasional financial trip-ups throughout their lives will help you to keep striving for financial success despite intermittent setbacks.
Although these budgeting observations seem a bit self-evident, sometimes we overlook the most obvious things. Understanding the backbone that informs all budgets will help you get a better idea of how to go about your unique budgetary concerns.
Raine Parker, regularly writes on the topics of online accounting degree. She welcomes your comments at her email Id: email@example.com.
One thought on “Budgeting 101: Tracking Habits, Prioritizing Needs and Wants”
To make a personal budget work for you, you need to increase your monthly cash flow, which can be done by increasing income and reducing expanses.