Budgeting is probably the simplest and most important thing you can do to improve your money management abilities. Yet, many of us struggle to find the time and the motivation to commit to a budgeting plan. If you can push yourself to start controlling your spending, the rewards speak for themselves. You end up with a greater chance of reaching your financial goals, fewer cost concerns to worry about, and hopefully a lot less debt too.
Of course, the initial transition to restricted spending can be a lot for some people to handle. It’s a lot like riding a bike. At first, things feel scary and uncertain, but when you get used to it, the whole experience becomes simple and natural. If you’re new to the concept of budgeting, the following guide on what to expect could help you to ease into the process.
What to Expect from Budgeting Month 1
The main goal for your first month of budgeting is to establish a vision of what you want to achieve and come up with a path to take you from A to B. Make your budgeting experience as simple as possible and start by going through your bank statements from the last few months to set your transportation, housing, and fixed food costs. This will give you a realistic starting point when it comes to tracking your expenses, just make sure you give yourself a little room for error here and there.
The first month is all about getting to know your spending habits. Once you’ve got a solid idea of how much money you have coming in each month, and how much cash you’ve got going out, do your best to stick to it. You’ll probably mess up a little bit during this month – but don’t panic. Track your transactions and look for the categories where you spend too much. It’s worth keeping your eyes open for places where you have money left over at the end of each month too.
If you’re worried about tracking your expenses accurately, remember that there are plenty of apps out there that can help with this.
What to Expect from Budgeting Month 2
During the second month of your budgeting journey, you’ll be starting to feel more natural with your spending habits. You’ll be able to learn a little bit from your experiences in the last month and adjust your spending accordingly. For instance, if you had a hard time cutting your spend on takeaways, you might need to come up with a strategy to help you cook your favourite meals at home. Or, consider whether you need to give yourself a little bit more freedom a little bit more freedom in this area and cut back elsewhere.
Figure out where you’ve overspent or underspent in the last month and think about how you can fix these issues moving forward. One common problem is forcing your “catchall” budget category to contain too many things. You might need to break it down further to include expenses for dentist costs, hair appointments, and other things separately. Remember, there’s no limit to the number of categories you can have.
What to Expect from Budgeting Month 3
By this point, you’re sure to feel a lot more comfortable with your budgeting experience. For about sixty days now, you’ve been watching your expenses and tweaking your budget wherever necessary. Now, it’s time to think about where you’re spending your money with more caution. For instance, ask yourself whether you would have an easier time sticking to your budget if you didn’t have to worry about paying so much interest on your credit card debts. If this is a problem for you, then it might be helpful to consolidate some of your debts into a personal loan with a lower interest rate.
Consider adding smaller goals into your budget too. For instance, you might have started with a simple ambition to improve your spending habits. However, now that you’re getting the hang of things, ask yourself whether you want to save up for Christmas, a new house, or even a comfortable retirement. Play around with your budget, starting with your highest priority and moving down.
Remember, at the end of your ninety days, you might have seen a few changes happening in your financial world. If that’s true, then you’ll need to re-assess your budget and make sure that everything still makes sense before you move into the next month.