Beginner’s Guide To Budgeting And Saving
Budgeting and saving are two related terms that make the smart money man. This is because money does not multiply unless it is invested. However, for money to be invested, it first has to be saved. While some might argue that the rich do not need to save to invest because the money can be pulled at once, the very act of setting aside money for the investment still counts as saving. As a result, budgeting and saving are two key steps to building a financial portfolio. They both involve planning and discipline which are important for making wise investments. Budgeting and saving also help to cover unexpected expenses that may arise, and provide a cushion of security for the investor.
What is Budgeting?
Budgeting is the process of setting aside money for different expenses and investments. This helps you keep track of your money and make sure you can cover your expenses and save for your future goals. By budgeting, you can prioritize your spending and make sure that you are living within your means.
What is Saving?
Saving is the actual act of putting money away for long-term goals. This can be done through a variety of ways, including putting money into a savings account, investing in stocks and bonds, or even setting aside cash into a piggy bank. By saving money, individuals can set themselves up for future financial stability and security.
Budgeting allows you to set realistic expectations and goals for yourself and your money, while saving helps you to actually reach those goals by setting money aside. Combined, they are an essential part of financial success.
Step-by-Step Approach To Moving From Budgeting to Saving
People have a lot to say about budgeting and saving, but many of them never really tell how it’s done. This post will walk you through the steps. While many people alienate budgeting and saving and create different guides for both, in this post, the two will be combined for your convenience.
Step 1: Make a list of expenses before you make money
First rule of saving and budgeting well is making a list of your expenses before you get money. This is because you tend to buy things impulsively when there is a lot of money in your account and you have not decided on what to do with it. By making a list of your expenses first, you are able to prioritize your spending and make sure that you are allocating your money to the most important things. This helps to ensure that you are not spending money on unnecessary items.
Step 2: Set your goals
Decide on how much you want to save before you get money. This will serve as a guide for you to create your budget and prevent you from spending too much. Having a clear goal in mind will help you prioritize your spending and make it easier to stick to a budget. Knowing exactly how much you want to save can also help you develop a savings plan and keep you motivated to reach your financial goals.
Nevertheless, do not make your goal too high. It’s okay to start small. Setting goals too high can make you unmotivated.
Step 3: Compare your expenses with your income and goals
Now, this is the hard part. Your goal is fixed, and so is your income (for the moment). So, the only thing you can change here is your expenses. Reduce your expenses to make your income accommodate your expenses and your savings (goals). To do this, you need to identify areas in your list where you can reduce spending and save more. This could include cutting back on luxuries, eating out less, and shopping for deals. You could also look for ways to increase your income, such as working overtime or taking on a side job. With some planning and dedication, you can make your income accommodate your goals.
Step 4: Create your budget
While a budget might sound like a list of expenses, it is not essentially so. This is because your budget will include your savings, and emergency funds. Nevertheless, your budget will be created from your list of expenses.
While creating your budget, ensure that all expenses have been added. Cross-check your budget multiple times to ensure that all expenses are recorded, with enough money allocated to them. This is important because if you don’t account for all of your expenses, you may end up going over budget and spending more than you can afford. Additionally, if you don’t allocate enough money to certain expenses you may find yourself in a situation where you don’t have enough money to cover them. However, you still need to keep your budget within a reasonable limit.
Step 5: Pay yourself first
Usually, when people collect money, the first thing they do is settle their expenses. However, the first step should be paying yourself. Remove your savings before spending on expenses. This way, you will not eat into your savings. Online banks like Mintyn (https://mintyn.com/) and the mobile application of some banks like Wema Alat have an option for saving. By paying yourself first, you will be putting your savings away before you have a chance to spend it on expenses. This way, you can ensure that you are setting aside the money you need for savings and will not be tempted to spend it on unnecessary items.
Budgeting and saving are essential for multiplying your money. This is to prevent you from spending all your money on unnecessary things. However, saving and budgeting are not easy. This is why beginners need a guide to help them get, and stay on track.