JJ Tax Blog
The Art of Budgeting

The Art of Budgeting

Most of us have an important general idea in our heads of what we spend our money on and how much. But carrying out these actions consistently over the course of a few months will unquestionably serve as the foundation of your financial life and that is how the art of budgeting is! Though it may sound scary, to begin with, but do not worry, following these 5 steps will push you towards a financially amplifying life!

Step 1: Track your expenses

Keeping track of your spending is the first step in creating a sound budget. Before you properly grasp your spending habit, it is unreasonable to assign arbitrary numbers to various expenditure categories. Select an expense-tracking app and begin logging every purchase you make in a month. Instead of using an app, you may either use a notepad or an excel file. Make a note of every expense, whether it was made with cash, a credit card, online, or offline. Each and every one.

Step 2: Track your earnings.

Make a note of your monthly earnings. Examine your most recent bank statement if you work as a freelancer. Make a note of your typical monthly income.

Step 3: Create a sample monthly budget.

After keeping track of your spending for a week, you may infer how much you would typically spend every month. Write down these monthly totals on a piece of paper while seated and armed with a calculator. Adjust these figures as necessary to arrive at the optimal budget for each of these areas. This is your hypothetical monthly spending plan.

Here is a guideline for the maximum proportion of income that may be used to cover these 10 kinds of costs.

Rent and utilities account for 25% of income.

Food and Rationing - 10%

Transportation: 10%

10% for entertainment and shopping

10% percent of vacations

Health and Fitness - 1%

Repairs and maintenance: 1%

Educational attainment: 1%

Gift-giving: 1%

1% goes to others.

Keep in mind that these percentages are calculated using your entire monthly revenue.

Step 4: Take income growth into account

Consider the formula :

Income - Investment = Expenses

as you keep tabs on your spending. Consider saving around 30% of your salary so that you may invest the rest. Reduce it if it seems excessive at this point, but make sure it stays at least 10% of your income.

The very minimal minimum is 10%. Later, you might increase this proportion. Increase your savings proportionally as your income grows over time. When you take inflation into account, we sometimes have a tendency to disregard this component, but it is crucial.

Making your money work for you requires you to follow this step.

Step 5: Invest 10 minutes each Sunday.

Make logging your expenses a routine. Make a note of every purchase as you make it. Then, set aside 10 minutes once a week, preferably beginning on a Sunday, to compile your weekly expenditures on your budget sheet. This can be completed in 10 minutes or less. Compare the real figures to the figures from your hypothetical monthly budget. The model numbers should be adjusted if necessary. Be patient with yourself, particularly during the first several months. This is something new that you're still learning how to do. It helps to be patient with the outcomes.

It's a good idea to start budgeting. However, an intention is nothing more than a choice that doesn't result in action. It takes consistency to stick to a budget. Give this habit two to three months to develop. Take it slow.

Final words!

Maintaining a budget can help you have more money than you need all the time, guide you toward debt freedom, and keep your eyes fixed on the prize of financial independence. Although not everyone has solid money management habits, those who do are without a doubt happier, less stressed, and financially stable for life.

JJ Tax Blog
FunnTaxx by JJ Tax gives you the ins and outs of taxes and personal finance to hit the savings jackpot! This podcast is specially curated by tax experts and professionals in the finance field to keep you aware and informed so that you never miss another opportunity to save on tax and grow your knowledge.