How to budget your expenses
Updated: May 3, 2020
Have you ever budgeted your expenses? Have you started this activity and failed to continue?
Read this blog to know simple ways to budget your expenses.
Listing your expenses
Listing down expenses is the first step to budgeting. Before making any decision regarding your budget, you need to know what are your budgets.
Various ways to list down your expenses is to calculate the below sources
Grocery items- This will include your pantry and random food items you are buying. The food item bought in bulk should be accounted for as well.
Shopping lists- This includes the money you spent on your various shopping spree. It involves everything from clothes, jewellery, and other essential items.
Credit card and Debit Card payment- We may include the payment made with cash. But, often we forget about those expenditures which on our Credit and Debit cards. So, be sure to cover them as well.
Monthly payments- These monthly payments include monthly insurance payments like insurance payments, mutual funds payments and also any other such recurrent payments.
Determine your income
To determine your income, you need to calculate your income which comes from various streams of sources.
They can include multiple sources such as
Basic salary
Rent income
Cash gifts
Profits etc
50-30-20 rule
Senator Elizabeth Warren has popularised the 50-30-20 rule implicating that you need to divide your income in the following way.
50% for your needs, the essential things you need.
30% for your wants, the things you don't necessarily need but want to buy.
20% for your savings.
After subtracting your monthly payments like life insurance, you can divide your income in the 50-30-20 ratio.
Track your future expenses
The above steps will not work if you do not track your future expenses. Therefore you should follow your future expenses so that you don't lose its track. You can use either a pocket diary or expense tracker apps to track your expenditure easily.
Bonus Tip
Although we might want to follow set guidelines to budgeting, we need to be realistic in the approach. You need to figure out what works best for you so that you can stick to budgeting and enjoy its numerous advantages.