If you’re completely new to budgeting, I got you covered.
Understanding that you need to be methodical about saving money is half the work. Most people want to save money but they don’t even take the very basic step of trying to educate themselves. You did…
Budgeting is the order that the chaotic overlap of unregulated needs and wants creates.
Putting it more simply, budgeting can get your finances in order and relieve you from the unnecessary stress that expenses create.
Budgeting offers the way out of this stressful situation and has the capacity to help you save money over the long-term.
If you think that budgeting is too complicated to follow by yourself, you’re in for a treat. Just follow these 4 budgeting process steps to start saving money more efficiently…
1. Figure Out what’s Coming In
The first one of the budgeting process steps is all about figuring out what your monthly income is.
You need to start tracking everything that can contribute to it, no matter how small it is. It doesn’t matter if you make most of your money from your salary or your part-time gig. Account for everything.
All that matters is what is coming into your bank account on a regular basis. You know, income that is predictable. If you think that your part-time gigs make for fluctuating income, just figure out an average number for it.
2. Keep Track of what’s Going Out
After you figure out what’s coming in, it’s time for you to determine what’s going out.
Sit down and note every monthly expense you have been making that is going to be recurring and all of those you are about to make on a monthly basis from now on.
Remember that as with income, you shouldn’t leave anything out. Whether it’s money for food, gas, or eating out, you write that down.
It doesn’t matter if it’s a necessity or something you just want. If it’s a regular and predictable expense, it needs to be accounted for.
Again, if some expenses vary from month to month, figure out an average number based on your expense history if it’s available.
3. Establish your Goals
Most people forget this one and yet it is one of the most important budgeting process steps.
After forming a basic idea of the money that comes in and out, establishing your goals will set you up for success when it comes to saving money.
It’s simply not enough to want to save money. That can hardly motivate anyone. Why? Because it is so boring!
It is far more likely that you will start and keep saving money if you have an ambitious goal. One that you feel passionate about reaching. This is the key to developing the discipline to save money.
Tip: Make sure you have an emergency fund in place before you establish your goals as unexpected expenses can often sabotage them.
Now, think about something you always wanted to do. This can be anything like buying your dream car, getting the mortgage for your dream house, or even travelling to exotic places.
It can be long-term or short-term. It just needs to be something that you really want. If you have kids, it may be being able to send them to college. If you’re an employee with entrepreneurship running through your veins, it may be launching your own business.
After you figure out the goal you want to achieve through saving money, try to estimate how much it will cost you. Then establish the time-frame you want to achieve that goal.
By dividing the amount required by the number of months by which you would like to achieve your goals, you get the amount you need to save monthly to make your dream a reality.
Write down that number and let’s move on to the last step…
4. Calibrate your Budgets
Now that you know how much you need to save monthly, it’s time that you go through the last of the 4 budgeting process steps; calibrating your budgets.
Begin by calculating what remains after you deduct your total monthly expenses from your total monthly income. If the amount is not the one you expected to save monthly to reach your goals in time, then it’s time for sacrifices…
Now, I don’t mean that you necessarily need to be content with a longer time-frame. You have two other options here…
Either you increase your income or decrease your expenses by setting fixed budgets for each one.
If you choose to go with the first option, you may need to work harder and ask for a raise. Or get a side-gig going if you got some skills. Whatever it is, it will need to permanently boost your monthly income.
If you go with the second option, start from your expenses that aren’t about covering necessities, but wants. If you regularly eat out, try to cut it down a bit. If you buy a lot of new stuff for entertainment, try to be content with less.
A lot of the time, even necessary expenses can be reduced. Do you pay for an internet connection? Try to find a better deal. You pay a lot for gas? Maybe you can replace your vehicle with one that has better gas mileage or a Tesla 😉. If you get creative, the sky’s the limit…
Whatever you decide to do, stick to the budgets that you place and you’ll be closer to reaching your goals within a predictable time-frame.
Let’s Recap
As you can see, saving money becomes easier if you figure out the budgeting process steps you need to follow to do it efficiently.
To recap:
- Make sure you account for everything that comes first, whether it is salary or part-time income.
- Then, track everything that goes out of your account to expenses for necessities and wants.
- Afterwards, set some clearly defined goal(s) and imagine when you would like to achieve them. Setting a realistic time-frame but ambitious goal is the key here.
- Last but not least, calibrate your budgets until you make sure that you can set aside the required amount of money each month to achieve your goals in time.
The key to budgeting is to always keep your plan up to date. Circumstances can change. You may change your mind about your goals or you may have to account for more expenses.
Whatever it is, it has to be taken into account as you save money.
Now, I hope this list of the 4 budgeting process steps helped you understand how you need to go about saving more money.
Thanks for reading and please share this article if you found it useful!
Till next time…
Disclaimer: This information should not be viewed as financial advice. You should consult a financial advisor or do your own due diligence before you invest. The owner of this website and author of this article are not to be held liable for any undesired result by anyone who uses this information that is provided here in any way.
