Budgeting is an essential personal skill to master, but for many people, the first time they learn or hear about money management techniques is too little too late. Most of us didn’t learn how to budget in school, or at home, so we’re kind of left to figure it out for ourselves. This lack of financial education is one of the main things that’s to the astronomical levels of personal debt and poverty that we see today.
From applying for a loan to investing in the stock market, there’s a lot to cover when it comes to personal finance management.
First thing’s first: you need to start a budget. No matter how substantial or limited your income is, everyone should have a personal budget in place. Not only does a budget help you afford the things you need and want, but it also helps you make progress toward your financial and personal goals. Whether you want to buy a house, live debt-free, or pay for higher education, it all starts with a great budget. But where do you start?
Use these guidelines to help you get started:
- First, tally up all sources of income, including:
- Your primary paycheck
- Secondary income (freelance, side gigs)
- Then, add up your fixed expenses, such as:
- Rent or mortgage payments
- Loan payments
- Estimate your variable expenses, like:
- Subtract your fixed and variable expenses from your income
- Assess what’s leftover and plan where the remainder will go:
- Discretionary spending
- Emergency fund
Keep in mind, your personal budget is not static. As your financial situation or priorities shift, your budget will have to, too. Make it a point to review your budget on a regular basis and adjust as needed.
Crunching numbers by hand can be really time-consuming and inefficient, especially if you’re not a math wiz. Luckily, there are plenty of solutions that can help beginner budgeters. Here are a few popular personal budgeting apps that simplify and bring your budgeting efforts to life:
Limiting spending is a challenge all of us struggle with. Between tempting and targeted social media ads to convenient online shopping methods, it’s all too easy to overspend. But identifying how you can live within your means is a crucial step in the right direction.
Here are a few approaches to help you cut back spending:
- Assess your monthly subscriptions — you’d be surprised how many go unnoticed!
- Reevaluate insurance coverage; do you still need this level of service or is there a more affordable alternative?
- Take a look at your dining out habits; can you cook at home more often?
There are probably plenty of things that you want to keep spending money on, and better budgeting doesn’t mean you have to sacrifice these luxuries. However, you might want to make a little extra space in your spending budget to do so. Luckily, there are tons of side hustle options you can take advantage of in order to increase your budget’s wiggle room. Just take a look at these ideas:
- Sell your used clothes on a resale app or store
- Sell used furniture and miscellaneous items via
- Facebook Marketplace
- Monetize your professional skills on freelance networks
- Simply Hired
If after reviewing your budget you find that you have some extra spending room, consider growing your dollars through investment. This might sound like a big step for beginning budgeters, but there are many options to choose from depending on your risk acceptance, budget, and investment knowledge.
Putting money into a retirement fund is a great way to leverage tax-advantages and watch your money grow over time. There are many types of funds to choose from, including, 401k, IRA, Roth IRA, SIMPLE IRA, and SEP IRA. If your employer offers a 401k match program, you’ll have an even better opportunity to maximize your hard-earned dollars.
Thanks to modern technology, there are tons of really simple ways you can invest in the stock market. Two of the most common approaches are robo-advisors and wealth management firms. Robo-advisors use client-set preferences and algorithms to create an investing approach that makes sense for you. Wealth management firms and financial advisors facilitate investment strategy and execution on your behalf, according to your risk assessment, budget, and preferences.
Learning how to budget, file your taxes, and maximize your money can be a long road. To jumpstart your journey, use these 4 tips as your guide.