Setting a strict plan of budget can be a difficult thing for people to do in good form and actually come out on top – sure, the idea is simple enough! “I’ll make my plan simple, save up some cash, and be better off in a year from now.” The reality is much harder than that and often fraught with dangers and other problems – it’s important to know exactly what you’re doing while simplifying your budget plan and to have an idea of where your beginning is and where your end will be.
Do a bit of research online or with finance-savvy friends to figure out different ways you can go about actually creating, planning and implementing your budget – don’t be afraid of revision! That’s just part of finances: you’re going to have to change things as your life changes, whether that’s cutting back parts of your life to make up for a sudden expense or expanding your budget to account for a general rise in quality and expense.
Ultimately, whatever type of budget you’re thinking of using when it comes to simplifying your budget plan the two most important things that you need to keep in mind are these: your expenses, and your income. It’s what we’re going to focus on now as we talk about different methods you may consider following to simplify your budget plan.
Simplifying Your Budget Method One: Calculate Income, Then Expense
Once you have your first budget plan made it’s going to be easier to keep it on track in the future – but making the first one is going to be a tedious trouble. After that you’ll find that editing and adjusting things come a bit more naturally to you, but let’s talk about how you should first figure out this method of simplifying your budget – income, then budget!
First off you want to figure out how much you actually make. You take your income and split it up into different percentages according to your rough set of needs. Let’s look at something of an example, and it’s one that isn’t a bad one:
- Say about half your income goes into needs and fixed expenses like rent or utilities, mortgages and premiums – the sort of monthly expenses that come along and make the largest hits on your bank account.
- Put fourth of it into other needs and also your wants. 25% for food, entertainment, clothing and so on – go for the minimum and scale up from there to keep this within your budget.
- The last 25%? Right into savings or debt payments. Remember that saving up money over time will pay off in the long run!
That 50/25/25 split above isn’t a constant thing – because maybe you don’t have to worry about one type of expense as much of the others. Do you not really bother with entertainment, buy cheap clothes and get food from a cheap co-op? You can probably spend less on that middle 25% – or maybe you have no debt? You can probably put aside less for savings and not worry about paying off your bills – as you don’t have them.
The good part of this is that you know how much you need to make in order to work out your budget. If you spend $1000 in a month, then you know how much you absolutely have to set aside for food and groceries and other expenses – and if you run out, then you know you have to raise your budget just little bit or cut back.
What’s the downside? Well, it doesn’t really encourage that you make more money – and if you’re income isn’t too high to start off, it might be a little hard to stick to this simplifying your budget plan.
Simplify Your Budget Method Two: Expenses, Then Income
Let’s say you want to go with a different plan – one where you establish your budget before you factor your income into it. This might work, and it might be an interesting concept to try out – and it’ll tell you how much more you’re going to want to make. Let’s look over a few examples:
- Say you spend around $2,050 on your expenses ($1500 on mortgage, $100 on insurance, $200 for utilities and $250 for your car).
- Then another $1,250 for fluctuating expenses ($300 for food, $200 for other groceries, $100 on your phone, $150 on gas and $500 on entertainment).
- Finally, in savings, you put away $500 for retirement, $200 for vacation, another $250 for a college fund and $100 for an emergency – for a total $1,050.
It comes out to $4,350 – which is how much you can say you have to make with every passing month. Say you only earn $4,000 a month – now you have to figure out to make that extra few hundred dollars to stay on top, and there are plenty of ways to make that extra income (a second job, an online job – etc.).
It can be hard to do, but it’ll encourage you to make money – each side has its benefit and downside, and you have to pick which is best for you.