Financial stress can be taxing on your overall well-being. Credit card bills, student loans, mortgages, and recurring payments, such as cell phone and car insurance payments, are just a few of the costs that Americans juggle every paycheck. As expenses loom, having no budget plan can cause a great deal of stress. Although creating a plan may seem daunting because you have to face the numbers, having a solid road map that gives you clarity will lessen the overwhelming sensation as you move forward.
The trick to making a budget work is by following through with your plan. Make a commitment to stick to budgets for each category and learn to delay gratification that comes with making small or big purchases. Bring in family or friends that can help you stay accountable to your goals. Everything that is worth having seldom comes easy. As you read through the list of steps towards creating a budget, know that it will be a challenge, but you will find peace of mind as you progress through your journey.
Visualize your ideal situation
Before getting into numbers, either think about or write down your ideal situation and or lifestyle. What is it that you want to feel? Do you want to feel stress free from financial burdens? Do you want to be able to afford trips and or material items you currently can’t afford. Be specific and visualize where you want to be. Visualization will help your mind feel more secure in following through with your goals. Without a goal, you won’t be as motivated to commit to the journey.
Figure out your monthly income after tax
How much do you make each month after taxes? Include everything from your main job, to side jobs. Be sure to figure out the amount you actually take home (after tax).
Add up recurring monthly expenses
Recurring expenses comes with adulthood. Add up the unchanged expenses you must pay each month, regardless of where you live. These types of expenses include monthly rent, car payments, phone bills, etc.
Review at least 2 months of purchases
Review at least two months worth of purchases you’ve made and separate them by category. To get a clearer picture of your spending tendencies, add each purchase under categories, such as groceries, shopping trips, restaurant trips, etc.
Average out discretionary expenses
After getting hard numbers on your actual monthly purchases, average out how much you spend under discretionary categories such as: entertainment subscriptions, shopping trips, grocery trips, etc. Here you can account for how much you will spend per category, and expect yourself to spend around the same amount each month. Reviewing your purchases is also a great way to recognize if you are spending too much or have room to spend more in each category.
Set a savings goal
Subtract your monthly expenses (unchanged expenses and discretionary expenses) from the amount of monthly income after tax to get an amount that is available for your savings. The not so fun part but the most crucial part is setting a savings goal! This is the amount from each paycheck you will put away and not touch! At least 10% of each paycheck should go to savings, but you can increase that number depending on your savings goal.
Setting a budget is the easy part. Following through takes practice and patience. Be realistic with yourself and be flexible to reduce stress, in cases where you aren’t able to meet your goals. Keep working towards a more stable cycle of money in and money out and you will feel less stress in no time.