Budgeting can be hard but start with these three small steps to take action and start building your savings.
Without a plan, building your savings longer-term is going to be a difficult task. But knowing a few important numbers about your current situation and goals can help set you on the right path for your financial future. So sit down, get your pencils out, and let’s start looking at your numbers. Can you answer these 3 key questions?
1) How much do you make per month?
This one seems obvious, but you would be surprised how many people do not actually know how much money they earn per week, per paycheck, per month. Do you get paid hourly or do you make a salary? This question is always complicated by the various taxes that are deducted from paychecks, but it is very important to consider these when thinking about your overall budget.
2) How much do you spend per month?
I know, I know – I don’t like to admit this either, but you probably spend more per month than you would like to admit. This can include everything from your rent to how much you spend on food and your cell phone bill. Some of these are difficult to change on a monthly basis (rent), but other expenses (like $4 lattes) are probably easier to adjust if needed. Regardless, it is important to have a general idea of how much you spend in common expense categories.
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3) How much do you want to save per month?
Wealth is built over time as you spend less than you make. How much you save is simply how much you make (question 1) minus how much you spend (question 2). Tracking this on a regular basis can take some effort but it will be worth it as you see yourself slowly increasing your savings. The main part of this question is determining how much you actually want to save per month. Once you have a goal in mind you can determine if you either need to figure out a way to make more money or think about ways to reduce your spending.