On this episode of 2 Frugal Dudes, were covering the bases of how you can start a budget!
Why You Need to Start a Budget
Starting a budget is the key to being successful and reaching your financial goals and other long-term goals. You need to know where your income is going and what your monthly expenses consist of. This awareness helps you stop swiping your credit card mindlessly.
Tracking your spending can be eye-opening, as even small costs add up over time.
How to Start a Budget
How can one go about starting a budget? Well, tracking your spending is a part of it so that you can see where your money is going now. Look at both your fixed expenses and variable expenses to find out how much you have to spend each month versus how much is on extras. Rent, groceries, and other living expenses are all costs you can’t really avoid. Eating at a restaurant and buying video games are extras.
Your Medium for Starting a Budget
How you go about tracking your spending and recording your income is a personal choice. You can use a pen and paper and keep track of everything in a notebook, use a budget spreadsheet in Excel or use budgeting apps like Mint to integrate with your debit card and credit card spending.
Once you have a better understanding of your living expenses and income, you can start to set some short-term goals and set a plan for your budget. Your short-term goals might be to pay off a student loan or line of credit or to start a savings account. It’s a personal choice.
Sean and Kevin both categorize their expenses, breaking it down into groceries, insurance, and miscellaneous. Whereas Sean takes a higher level approach, Kevin’s is very granular with bill timing incorporated. Kevin practices zero-based budgeting, which means that no matter how much your income and expenses are each month, every dollar has a place to go.
It’s Probably Not an Income Problem…
…it’s a spending problem. For most people, it’s not that they don’t make enough money, they’re just spending too much. That’s why it’s important to track your spending and find a balance between your income and expenses.
Your approach to budgeting will vary based on if you have variable income or a fixed income. You’ll have to adjust your tracking based on your work and save money when you can to make up for when times are tight.
It’s ultimately about learning what works for you and getting over the fear of looking at your accounts. Know where you stand so you can start measuring your progress. CHA-CHING!