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You’re never too old, or too young, to start and follow a budget. Amy Maliga, financial educator at Take Charge America, said following a budget is the cornerstone of effective money management. A budget is a tool that helps you keep track of how much money you have coming in, how much is going out and exactly where it’s going.
Read: How To Set a Realistic Budget You Can Live With
And More: 23 Tips To Build Your Emergency Fund
Ready to start budgeting? Follow these steps to find out how much money you’re spending and avoid making rookie budgeting mistakes.
Use a Tracking Tool
Don’t make the mistake of drafting your budget on Post-it Notes. Maliga recommends using a designated tracking method you know you’ll be able to stick to like a spreadsheet, physical notebook or dedicated budgeting app.
Don’t Set Outdated Financial Goals
Brittney Castro, financial expert and Mint’s in-house certified financial planner (CFP), said one of the first steps to starting a budget is to review your financial accounts and make sure you know where you stand in terms of your net worth.
Then, you’ll want to review your financial goals. Determine the priority of the goals you have and put them in writing so it feels actionable.
When setting financial goals, don’t make the mistake of setting goals that are no longer relevant to you.
“If you find the goals you made last year are no longer relevant or a priority for you, find a new direction for where you want to focus your financial goals,” Castro said.
Castro recommends reevaluating your financial plan with life changes or every year. As you set new goals, remember to stick to them over the long haul. Try to avoid making constant changes with every ebb and flow of life.
Find Out: 17 Biggest Budgeting Mistakes You’re Making
Track All Expenses
Keeping a budget means figuring out how much money you have coming in every month and the source of this income. This may include your take-home pay, freelance or side hustle pay, bonuses, spousal or child support and any government benefits.
Once you know how much money is coming in, it’s time to figure out and track your expenses. Maliga recommends tracking the following expenses.
- Fixed expenses: These are the expenses that stay the same each month including rent, mortgage payments, vehicle payments and insurance premiums.
- Variable expenses: These expenses change each month. Think groceries, utility bills, …….