A Beginner’s Budgeting Guide – 6 Budget Tips For First Time Savers

Remember that budgeting doesn’t need to be stressful or confusing, neither does it have to limit your freedom it should instead give you the freedom! It might seem a little daunting at first, but with the following budget tips – whether you saving up for a short-term goal or a long-term goal – budgeting should almost seem effortless. So here’s a few tips for how to budget on a low income…

1. The question should be – why do you want to budget? Instead of how to budget!

The key for how to not only create a budget but also successfully stick to you budget, basically comes down to determining exactly why you are wanting to start saving your money, and alsounderstanding what motivates you to save each month – like creating a clear and achieveable saving target(s).

The main questions that you should be asking yourself before creating your budget:

  • What a realistic, but yet challenging, goal that your are able (or want) to save?
  • What will motivate you enough that you’ll be willing to stick with you budget, even when this become alittle tricky?
  • What’s important to you? (e.g. Are you wanting to become a homeowner?, Are you wanting to travel more?)

2. Seperate between short-term & long-term saving goals

Once you have decided what you are wanting to save up for, then the next step is to build a budget and divide your saving goals into your short and long-term plans.

Decide what your short-term saving goals are?

  • A deposit/initial first payment on a car
  • For an emergency fund
  • New furniture
  • A weekend away

Decide what your long-term saving goals are?

  • Pay off any large outstanding debt
  • A deposit for a flat or house
  • A trip abroad
  • Starting your own business
  • Saving up for your retirement

3. Track your spending

To budget effectively, your first need to understand exactly how much will be coming in and out of your account each mont. The best to track you income and expenses is over a 30-day period – including every single transaction. You can either note your expenses in a spreadsheet or use a budget app.

4. Separate you fixed expenses from your variable expenses

Once you have a clear understanding of your income and whereabouts your money is going each, then your next step is to separate the fixed costs that you have to pay every month [electic & gas bill, rent/mortgage, house & car insurance, mobile phone contract] and variable cost that may changes from month to month or week to week [food shopping, clothes shopping, eating out, enterainment – cinema, concerts].

If you are wanting to readuce your variable costs then you might want to consider the folllowing budget tips:

  • Do you really need to upgrade you phone to the lastest model or does you current does the job and works just fine.
  • Save before you buy! Only buy things that you want, by saving up a little extra each month.
  • Meal prep for the week at home instead of buying lunch at work or a shop everyday.

5. Plan a monthly budget

After you understand why you want to budget, what you want to save for and what your incoming/outgoing is, it is time to work out how you’ll save your money each month. Obviously this will vary from person to person – like if you a freelancer with a variable income or a full-time employee with a steady wage. Here’s the 50/20/30 rule to encourage you to budget:

  • 50% of your wage goes towards you needs – rent, bills and other fixed costs.
  • 30% of your wage allocated towards things the ‘you want’ – eating out, hairdressers or clothes shopping.
  • 20% of your wage goes into savings or paying off outstanding debt.

6. Create a contingency budget plan

Of course there will alway be suprises life, so it’s a good idea to include an emergency into you budget plan for when things get a little complicated.

  • Emergency fund as part of your monthly budget- This could mean that you save about 5% of your income every month for unforeseeable circumstances.
  • Fallback budget – This kind of budget is where you cut out everything that isn’t essential for everday life. Frees up some money that can be use for an emergency fund.

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