With all the sales and gift giving happening during the holiday season, there’s no better time to start budgeting!
Why is budgeting so important? It can help you stay organized and on top of your expenses so you can make the most out of what you have while still paying your bills and saving. Here are some tips on how to start budgeting while still enjoying all that the holiday season has to offer!
When starting to budget, the first thing you need to do is assess where you are financially. Understanding how much money you bring in on a monthly basis is crucial to knowing how much you can spend during the holidays. Whether it’s income from one job or a couple side jobs, outline every penny that you typically earn.
Next, look into how much money you have to spend for necessities and current bills. How much do you spend on rent, loans, electricity, utility bills, groceries, etc.? Don’t forget to add any monthly subscriptions you might have. For instance, do you pay for music or television streaming subscriptions?
Don’t forget to set aside a little money for an emergency fund. An emergency fund is for any unexpected emergency expense such as a hospital visit, job loss, or car issues. These unexpected emergencies can end up being very costly. Making sure you have enough money set aside is crucial. As far as how much money you should be putting away, it depends on how much income you bring in. A general rule of thumb is to set apart 10% of your paycheck for savings. If you immediately put it away, you’ll be less likely to spend it.
Now you’ll start to have an idea of your debt to income ratio or essentially how much money you bring in versus what you typically spend.
One of the hardest but most important aspects about budgeting is asking yourself, what do I need to spend money on and what do I need to scale back on? If you’re looking for more ideas to save money here are some tips:
- Cook at home and save the expense of ordering take-out or going out to eat
- We know it can be hard but skip the $5 daily coffee and make it at home
- Buy generic items instead of name brand, they usually are the same product
- Unsubscribe from retailer’s emails that may tempt you into frequent sales
- Get a library card instead of buying pricey books
- Cut back on unnecessary and unused subscriptions
- Remember to turn off lights and unplug unused items that could affecting your electricity bill
- Save your loose change, it adds up!
Allot 10 minutes at the end of each week to add all of your expenses in a spreadsheet. You’ll easily get the hang of it and it won’t feel like a giant chore. Most online banking systems will show you a breakdown of your expenses or you can try a platform like mint.com to track spending. If spreadsheets aren’t your thing there are plenty of budgeting apps you can download! Check out some of the best budgeting apps of 2020 here.
Once you have a strong understanding of your expenses and income from steps 1 - 3, you can start looking at how much you can allocate to holiday spending.
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