A budget is a plan that outlines how you intend to spend your money each month. Your budget should tell you:
- How much money you make weekly, bi-weekly or on a monthly basis.
- How much money you spend.
Whether you're new to budgeting or want to get better at it, here's how to make a budget in 5 easy steps:
- List your income
- List ALL your expenses
- Subtract your expenses from income
- Track your transactions
- Repeat: Make a new budget before the following month begins
What is a Budget?
A budget is just a plan. It's a plan that outlines how you intend to spend your money each month, giving each dollar you make a purpose.
How to make a Budget?
Give Every Dollar a Purpose! By understanding where your money is going, you can identify areas where you can adjust your spending and make room for the things that truly matter to you. So grab you pen and paper or a Monthly Expense Tracker to begin!
Step #1: List Your Income
The first step in creating a budget is to list all your sources of income. This includes your regular pay checks and any additional earnings from side hustles or freelance work. Be sure to include all income sources, no matter how small.
Step #2: List ALL Your Expenses
Next, it's time to list your expenses. Categorize your expenses into fixed (e.g., rent or mortgage, utilities) and variable (e.g., groceries, entertainment, dining out and shopping) costs. The more detailed you are in listing your expenses, the better you can manage your budget.
What are Fixed Expenses:
Fixed expenses are regular, predictable costs that you must pay consistently, on a monthly or weekly basis. Eg. T&TEC, Wasa, Gas, Digicel, Flow
What are Variable expenses:
Variable expenses are costs that can fluctuate from month to month. E.g Groceries, Dining out, Shopping, Transportation, Misc
Here are some examples of what your budget could look like:
Step #3: Subtract Expenses from Income
Subtract all your expenses from your income. This step will give you a clear picture of whether you're living within your means or if adjustments are needed.
This number should equal zero. Why?
This is called zero-based budgeting. It doesn’t mean that you spend all your money. It simply means you assign give every dollar a Purpose, eg. savings or paying of a debt or maintaining a bank account balance of $1000.
Step #4: Track Your Transactions
Tracking your expenses is crucial for budgeting success. Take the time to record each transaction, no matter how small. You can utilize tools like our expense trackers.
This habit creates awareness and helps you make informed decisions.
Step #5: Make a New Budget Before the Month Begins
Budgets are not static; they should evolve with your financial circumstances. At the end of each month, create a new budget for the upcoming month. Take into account any changes in your income, expenses, or financial goals. By planning ahead, you can better allocate your resources and stay on track.
By following these five steps you can create a budget that aligns with your financial goals and helps you make the most of your money.
Don't Overlook the Importance of Budget Planning!
Budgeting empowers you to take control of your finances and give each dollar you make a purpose. With a well-structured budget and these budgeting tips, you can confidently manage your money
Start your budgeting journey today, and watch your financial future become brighter with each step you take. Here are some of our Budget Essentials to help you on your budgeting journey!