There are many tools and resources out there that help you set up a budget, but we know that time is money, so here is how you can do it in six easy steps:
1. Write down your income.
Whether it is your salary at the full-time job or your freelance hustle, add up all the income you receive and jot it down.
2. Calculate your expenses.
From rent to taxi fare and student loans, take note of your monthly expenses. Then, create a separate column for 'other', which is for unexpected expenses that might pop up once in a while and add a realistic number to this section.
3. Work out a realistic new expenses target.
This is where you need to identify the difference between 'wants' and 'needs' and make the necessary cuts. For example, do you really need two music streaming services or is one good enough?
4. Include your savings.
If you're already making regular savings, add this to your budget as well.
5. Punch the numbers.
Add up all the categories and see if there is a surplus or shortage. If there is a surplus of money, then you are good to go and budgeting the right way. If not, then …
6. Relook your budget.
If there is a shortfall between income and expenses, you will need to repeat the wants vs needs exercise, which can be found in our Savings course on MoneyEdge. Once you find there is no way to cut any more expenses, you will need to figure out a way to increase your income – either through a second job, working overtime, or maybe even looking for a new opportunity.
As your income or expenses change, revisit your budget regularly. It will help you make the short-term adjustments that impact your long-term financial freedom. To learn more about how best to save for your budget, complete our savings course on MoneyEdge!