Creating a budget can be stressful and extremely difficult if you've never done it before. You want to make sure you don't limit yourself and that you cover all of your expenses throughout the month. It can also be a lot of work to track where your money is going and make cuts to your spending. It's difficult to keep up with a budget, but it's extremely rewarding. Creating a budget is the first step toward a financially healthy life.
Creating a budget with room for the unexpected
A lot of people will only add a budget for their everyday expenses, but forget that life happens. You may get a flat tire or need to hire a plumber for an issue at your house. You can't always predict what will happen in life. That's why it's always a good idea to create a monthly budget for the unexpected. You can also take the money not spent each month in this category to create an emergency fund.
Track your expenses for a couple of months first
You never want to start making your budget by going in blind. If you aren't sure where your money is already going, it can be difficult to decide how to allocate that money. Trying to make your budget without first knowing where you spend money will lead to some trial and error before you finalize your budget. It's ok to take a couple of months and log every one of your expenses before you start to make your budget.
Remember the minor expenses when creating a budget
You want to make sure you're tracking every penny when you make your budget. Don't forget about small things, like a haircut, that you spend money on each month. It can be easy to forget about these things in your budget, but it's necessary to make sure you create the right budget and know where your money is going.
Find and cut unnecessary spending
After tracking your expenses and setting a budget, you can see where you may be overspending also. If you see a disproportionate amount of your money going to a certain category/place, you can make a cut. This is another good benefit of creating a budget or tracking expenses. Now you will know where you spend the majority of your money and can start to cut back expenses to work towards financial freedom.
If student debt is eating up a large part of your budget, consider refinancing using an income share agreement through Defynance. This new funding model allows you to pay a percent of your income for a period of time, in place of a loan with interest. With this model, your payments adjust with your income and if you're ever making less than $25,000 a year, your payments pause until you earn above the threshold again.
