Most people who get their first-ever paycheck are more concerned about where to splurge than how to save money. And some feel that every salary is their first one. They spend until the realization hits them – they are rooted in debt. Some can crawl out of it pretty quickly. But some take a turn for the worse that they stay alive on paycheck-to-paycheck while trying to make ends meet.
Fortunately, more folks now know how to budget their hard-earned money. They know that they need to pay for food, utilities, housing, insurance, and health care. When there are debts, they know they must pay for it ASAP. Making a budget is not rocket science, and individuals follow straightforward budgeting rules to the letter. They follow this simple checklist on how to budget to ensure that they live well within their means:
Identify your financial goals
You want to earn money because you have goals and dreams you want to achieve. Do you want to save up for retirement? Do you want to buy a vacation home? Maybe you want to buy a new car or travel to the Bahamas every year. Or do you wish to pay off your debts first before thinking of your future goals? Setting your financial goals is a sure-fire way to keep you on track. And when you plan for your finances via a strict budget, it keeps you off the unnecessary temptation for a better future.
Calculate current expenses and income
You mostly spend on bills and other necessities for you to survive. But other excessive items pare down your monthly budget big time. List down all of your expenses by checking all of your credit card statements and bank records. Look for patterns. Do you spend more on the day you get your salary than other days? What do you buy during those times? A dollar or two can go a long way, but you need to see where it goes first. Tracking expenses may be time-consuming, but it will be worthwhile and informative.
After examining your expenses, check them against your after-tax income. Is your salary just enough to pay for everything? Or do you need to borrow money a few days before you receive your paycheck? If you find that you are living from paycheck to paycheck with no savings in between, consider getting a second steady job. Side jobs are well and fine, but if you do not earn a regular monthly income from them, do not include them in your budget. These gigs can be put in a separate savings account where you can dig into for emergency purposes.
Revisit your budget
Not all budgets are created equal. Your budgeting checklist may have worked for the past year. But by this time, there are specific changes in your life, which will reflect in your financial capabilities. There is a possibility of a promotion or a raise in salary. Maybe you now have a growing family with a new baby along the way. Whatever the change, you need to make adjustments to ensure that your quality of life does not change for the worst. Revisit your budget and modify it if possible.
Your budget checklist may need a lot of work at first. But strictly adhering to it will ensure that you meet your future financial goals at the right time.