How to Budget?

It’s time! Time to learn how to budget! 

Budgeting can be tricky when you start. There are so many questions to ask yourself during this process like “Why create a budget in the first place?”, “Should I just aim to make more money to cover my expenses?”, “Should I cut back on expenses?”... All these questions and you didn’t even start yet! So, let’s start by asking the most important one.

What is the goal of budgeting? 

Creating a budget lets you accomplish personal goals. The most popular one is to clear up some debts or save for a project. 

Fundamentally, having a budget lets you know where your money goes. With that information, you can better understand how to manage your finances and make better decisions. Ultimately, you’ll be interested to know when this personal goal will be achievable through time.

In short:

• Find out where every dollar goes.
• Make better financial decisions.
• Set a target date of accomplishment for your goal.

Now that we know the Why, let’s go over the How. 

Step 1: Write down all monthly income and expenses

Most people start by making an Excel or a Google Sheet to make a list of all their monthly income and expenses. 

Making this list lets you become aware of your cash flow.

Step 2: Adopt a budgeting strategy that fits your lifestyle

The most effecient budget strategy is the budget splitting/slicing strategy. Essentially, this strategy consists of splitting your net income in main categories, and associating a percentage to each category. For example, you could use the 50/30/20 rule, which lets you allocate 50% of your net income on essentials, 30% on entertainment, and 20% on savings or for paying off debts. Other budget splitting rules exist, and choosing the right one depends on your lifestyle.

If you want to learn more about the most popular budget strategies, check out Budgeting strategies for your personal finances.

Step 3: Use a budget app (or any tool)

Many people tend to use a budget app (such as Miza) to automate their finances and therefore create a budget more easily. That way, every single transaction - recurrent and unforeseen - can be tracked effortlessly. 

You can also use other tools like Excel or Google Sheet, but then, you’d have to be somewhat of a master in leveraging such a tool that will automate your budget. This is why there are many budget apps out there that make the task a lot easier for you. 

Conclusion

In the end, no matter how much money you make, it’s always what’s left in your pocket that matters. Increasing your revenue won’t make you better at finance-probably worse sometimes. 

Define what kind of lifestyle you want and what’s important to you, adopt a budget strategy that fits your lifestyle, and enjoy your journey!

Want to start now? Try out our finance and budget app and we’ll accompany you in your finance adventures.