Do you have a budget for your spending?
If you don’t, now is the time to set one up! Budgeting is the best way to keep your spending under control, make sure you have enough to cover your bills, and help you save more every month.
But, creating your own budget can seem like a mammoth task. Luckily, we’re here to help!
Take a look at our budgeting tips to help create your own 2021 budget.
To start your budget, you first need to calculate your income. If you have incomes from different sources, make sure to add these together! If your income varies from month to month because you’re self-employed or work on commission, calculate a realistic average for the year ahead.
You also need to remember to subtract any deductions. For example, you might have income taxes, social security, and insurance to pay. Once you’ve deducted these, you should be left with your net income, which is what you actually take home every month.
If you’re self-employed and have an irregular income, creating a budget can be tricky! This is where you need some different budget strategies from other people. The best way to create a self-employed budget is actually to work backwards.
Start with how much you’ll need to get by. Calculate your bills, food costs, and other expenses you’ll need to live. This is the basic salary that you need to bring in every month.
You can then look at how much money you should be putting aside for savings, luxury items, and entertainment, such as nights out or trips to the cinema. If you’re in an industry that has a busy period, plan to save more during these months to give you a cushion for when work is slower.
If you’re self-employed and hire employees, make sure to check out the benefits of Payactiv! After all, it’s not just your budget that’s important when you’re a boss, but that of your employees too.
Next, you need to collect all of your bills. Organize them into time categories, recording which are due weekly, monthly, quarterly, and yearly. Once you know when each is due, you can plan to put aside money for them in your budget.
For those bills that aren’t taken so frequently, like yearly bills, it’s a good idea to put money aside for them throughout the year. Plan this into your monthly savings in your budget so that you don’t get caught off-guard at the end of the year!
In your budget, deduct your bills to work out what’s left.
It’s tricky to know how much you actually spend without tracking it. You might think you spend a few hundred dollars a month on groceries, but when you add up all the small trips to your local shop and the snacks you buy, that number might go up significantly! Go back over your financial statements over the past months – or even year, if you can – and work out how much you actually spend every month.
To help you out, here are some categories you can split your spending into:
You should be able to put all of your purchases into one of these categories. If you can’t, make a new one! Once this is done, you’ll have a better idea of how much you’re actually spending every month.
When you make a financial budget for 2021, it’s important you set out some financial goals to help you stay responsible with your money. These can be anything, from paying off a chunk of your debt by the end of the year to saving up to buy a car. Or, perhaps you want to cut down on the number of shoes or takeout you buy!
Your financial goals are entirely personal. By identifying your priorities, you can start to create a clear budget that you can follow. Having these goals will also give you the motivation to get better with your spending or saving, helping you have a great financial year!
Once you’ve drawn up your budget and financial goals, it’s time to look where you can cut back on lifestyle spending. For example, switch up your weekly dinner out with friends for a home-cooked meal with them.
Your must-have expenses should always come first. Your wants can easily be changed to make room for your must-haves.
If you’re ever struggling with your bills, look into the Payactiv Visa® Payroll Card that lets you access your earned wages.
Once you know how to budget for 2021, that’s not the end of your challenge; it’s just the start! Having a budget means nothing unless you put it into practice. So, once you’ve calculated your income, spending, and saving, check-in every month or so to make sure you’re staying on track. If there were errors in your budget, feel free to amend them as you go.
There aren’t many elements of a budget that are concrete. You might get a pay rise, your insurance costs may go up, or you might need to start saving for a new goal. Your budget is meant to be flexible, so don’t feel bad if you need to change yours.
There’s no perfect time to start budgeting, so don’t wait for the start of a month or year! Start creating your budget today and get on top of your money. In the long-term, you’ll thank yourself for putting in the time.
For more helpful tips and tricks, be sure to check out the Payactiv blog!