Money rules this world. It would be nearly impossible to live without it. Whether you are running a small business or living in the four walls of your home, money is extremely important, and you must create a Savings Budget.
Knowing where your money is going can save you from becoming broke, and it can be the difference between having zero dollars in the bank and being financially free.
How do you achieve this? Simply put, making a budget can change your life.
What is a budget?
In the most basic of terms, a budget is a plan for your money. When you create a savings budget, you are telling each one of your hard-earned money exactly where to go. There is no need to guess where it all went at the end of the month.
Budgeting does not have to be difficult. You can keep track of everything in a digital spreadsheet. There are plenty of options on the web to choose from that are pre-made to fit your needs.
Before you can create a budget, you must account for all of your monthly expenses. These expenses can include things like your mortgage, student loan payments, or even car insurance. If you are running a business, expenses include wages, salaries, and location costs.
Knowing what you spend on, you can now allocate all of your income into three categories. These categories include: Needs, Wants, and Savings. Transportation businesses, for example, will have expenses like fuel, vehicular maintenance, insurance, and licensing fees. Restaurants, on the other hand, need a significant budget for food and payroll, but allocating for other expenses like utilities is just as important. Prioritize budgeting and you will know exactly where your money is going or where it should go.
Here are the three key steps to making a budget:
1. Needs
The best and easiest way to allocate your money is to first put 50% of your income towards needs. Food, transportation, and utilities are perfect examples of things we can’t live without. For businesses, this should be your daily operating expenses, or even money put up for expansion.
2. Wants
The next allocation will be to put 30% of your income towards wants. Food may be a necessity, but eating out is definitely a want, not a need. The same goes for clothing and entertainment. Can you figure out the difference? For businesses, the owner’s income or salary is considered a want.
3. Savings Budget
Lastly, allocate 20% of your income towards savings. This includes savings accounts and emergency funds. For businesses, having enough funds put aside for emergencies can sometimes make or break you. You never know when equipment will need repair, or if you will have to hire temporary staff.
Tip: Pay Off Your Debt
Once your budget is in place, it is time to get rid of that debt. At this point, you should know exactly where all of your money is going. You should also know if you have anything left over to put towards your debt.
Any funds left over after allocating your income to needs, wants and savings should go towards your debt.
In Conclusion
Budgeting does not have to be hard, and if making one is a daunting task, have a budget prepared for you. Creating and sticking to a budget is going to give you control of your money and set you up for financial success.
Your financial goals, no matter how big, are achievable. Make a plan for your money and the possibilities are endless. Financial independence is within your grasp, and budgeting can get you there.
Financial Freedom Starts with Joy
Do you have a budget that works for you? Put an end to seeing zero dollars in your bank account. Start with a review of your financial statements. Set financial goals–and meet them. Be the boss of your money–and your life. I’m Joy the Bookkeeper, and I’m here to turn you into that kind of boss.
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