Whether you’re saving up for a big vacation or putting aside money for your retirement, knowing how to make a budget for any financial goal is an important skill to have. However, there’s more to budgeting than simply putting money into a savings account. Below there are a few tricks and tips that you can learn to help you make better financial choices and to understand how to better prepare for your future. We’ve also included a couple recommendations on apps and tools to help you with your journey on being financially savvy!
1. Figure Out Your Exact Take-Home Income
Your first step when learning how to make a budget is to determine your after-tax or take-home income. This is the amount of cash you have after 401(k) deductions, taxes, and any insurance costs have been taken out. Remember, this is not your salary (that’s your gross income).
2. List Your Personal Expenses
Once you have an idea of your take-home income, you can start calculating how much you generally pay in expenses. Expenses include rent or mortgage payments, groceries, utilities, transportation costs, loans, etc., that you are responsible for paying each month. The best way to figure out your expenses is to look at your bank statements and credit card statements to see which payments you make each month. Another way is through the Tally app. It has the tools you need to review your credit cards and strategize your payoff more efficiently. After subtracting your personal expenses from your take-home income, you may have some disposable income leftover (if not, then you are overspending).
3. Create a Spreadsheet
Having a clear understanding of your spending habits is crucial if you need to know how to create a budget. Without knowing where your money is going to, you could easily wind up spending more than you have available. Using a simple spreadsheet or Excel document is a great first start to monitoring your budget. We recommend writing down what you spend each month on expenses (groceries, rents, entertainment, etc.). If you’re not a fan of writing down your expenses, Truebill, also an app, helps you to track your bills or spending easily.
4. Invest in a Finance Budgeting Tool
Creating a spreadsheet can be a lot of work, but thankfully there are companies that make it easy for you to monitor your spending. Tools like Moneyspire connect directly to your bank account, so you can see all your balances and transactions in real-time. It also allows you to set up a personalized budget automatically notifies you if you go over that amount. That way, you can get a holistic overview of how much money you’re making vs. how much money you’re spending each month.
5. Remember to Contribute to Savings
Part of creating a budget is also planning for your future. Contributing to a savings account gives you more financial freedom, especially if you’re saving up for a big purchase like a car or a house. It also protects you against unknown circumstances in case you need some extra cash for emergencies. Acorns is a great mobile app that can help you invest. They automatically put the spare change from your normal everyday purchases into an account so you can start building up your savings account.
5. Look for Better Insurance Rates
Auto, home, health, and life insurance are guaranteed to be some of your biggest monthly expenses. You may feel like all insurances roughly cost the same – but that’s simply not true! SmartFinancial makes it easy for you to compare different insurance companies to help you find the right policy for your budget.
6. Don’t Fear the Stock Market
Investing in stocks and shares can make you a lot of money. However, it’s an incredibly risky endeavor that comes with an equally high chance of losing a lot of money as well. Working with an app like Robinhood allows you to build up a small portfolio with commission-free trading while also teaching you the ins and outs of the stock market. Feel free to also check out our other recommendations for the best stock trading apps here. Coinbase is a crypto trading platform which has been getting all the attention lately. If you’re interested with crypto instead of the regular stock markets, definitely check out Coinbase.
7. Make Sure You’re Correctly Filing Taxes
Everybody dreads tax season, especially if you anticipate owing a lot of money to the IRS. And although you can’t avoid paying taxes, you can work with a tax preparation service like H&R Block to see if there are ways you can pay less each year. Using their free online tool or working directly with a tax professional can save you hundreds or thousands of dollars. And if you’re entitled to a refund, they’ll also make sure you’re getting as much money back as possible.
Getting a handle on your financial situation doesn’t happen overnight. However, you can start taking baby steps by creating a better budgeting system so you can reach your financial goals, whatever they may be! If you’re looking for other ways to monitor your spending, check out these top 10 budgeting apps or general tips for saving money.
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