There’s no time like the present when it comes to evaluating your finances. During difficult economic times, it’s more important than ever to review your budget to ensure that you’re using your money wisely. That said, it can sometimes feel difficult to implement a new budget, especially if it requires cuts that you’re hesitant to make. So, we’re going to look at 5 ways to kickstart your next budget plan and put your money to good use!
Review Your Income
It’s hard to imagine a budget that could exist without some kind of income. Whether you live on a fixed or highly variable income, you’ll need to set a budget that is based on your weekly, monthly, or yearly income. First, see where your money is coming from.
Do you work a 9-to-5 job that provides a set salary? Do you work as a freelancer whose income varies from day to day? Do you live on a set retirement or disability stipend? Or do you have income streams from multiple sources? The answers to these questions will greatly affect your subsequent budget.
Review Your Essential Expenses
Once you’ve identified where your money is coming from and how much you’re working with, you’ll need to take a look at your essential expenses. For most people, essential expenses include, but are not limited to:
- Housing costs
Some people may have other essential expenses, like childcare or educational expenses. In any case, it’s important to distinguish your essential expenses from your non-essential expenses. While some people already know the difference, you can make the process easier with some form of budgeting software such as YNAB.
YNAB can sync with your bank account and help you visualize your budget so that it doesn’t seem so abstract and difficult to implement. You can click here to read a full YNAB review and see if it’s the best budgeting software package suited for you.
Review Your Non-Essential Expenses
Reviewing non-essential expenses is vital for devising and implementing a workable budget. Many people have recurring subscriptions, entertainment costs, and similar expenses that are not essential for living. If you find yourself struggling to pay the bills, the first thing to go should be your non-essential expenses.
This doesn’t mean you need to live a life without any fun, but if you don’t have enough money to match a certain lifestyle, you may want to cut back on certain expenses until you can increase your income. Subscriptions that automatically renew are a common culprit of reduced funds. Therefore, you should always be sure to unsubscribe from services that you no longer use.
Build Long-Term Savings and Investments
The future is never 100% certain, which is why every budget should include some form of long-term savings and investments. While you might be in the prime of your working years now, that may not be true in 10, 20, or 30 years. As a result, you’ll need to develop a plan to save for your retirement. This plan should include low-risk investments and savings to ensure that you have enough funds to live comfortably once you’re ready to retire. When you develop this part of your budget, also be sure to factor in taxes on your retirement income.
Put Your Plan Into Action
So, you’ve followed all of the steps above, now what? It’s time to put your budget into action! Most people develop a budget and then fail to follow-through for the long-term. Unfortunately, this renders budgets useless. So, push yourself to stick to your budget.
This doesn’t mean that you can never change your plan. Often times, life will throw you a curveball that forces you to make adjustments. While sticking to your budget as much as possible is important, don’t be afraid to make tweaks as needed!