Topic: The steps to follow in creating a budget - page 2. (Read 710 times)

Marry Christmas and happy new year.
 It comes to me to share my knowledge with others, but I am sure some might know the steps in creating a budget, but it might be that they are not following it effectively. I hope if I share such knowledge, it will help a lot, especially in the season we are in now. I know that as we have already celebrated Christmas, we have spent much of our savings, which we are still going to spend more on when it comes to the New Year celebration, so I take this as a reason to share such information with others so others will not suffer, especially after all this celebration, so I will list and explain the steps in creating a budget.
 
The steps in the budget include

1. Determine your income: As the first step in creating a budget, you have to know your total income in terms of what you can afford. Do not write a budget that is more than your income and end up not achieving anything at the end because your income determines your budget, so let's take note of our income first. This income might include your weekly,monthly, or even yearly income, as well as side hustles and any other source of income.
 
2. Identify where your money is going: The second step in creating a budget is to track your expenses. This is also very important because, without knowing how you usually spend your money, you will end up writing a budget that you can’t even stick to. More over, expenses include housing, transportation, food, entertainment, gambling, and so on. When you have identified where your money is going, you can categorise it into groups. For instance, clothing, house rent fees, and others should all be in the category of housing. If that is done, you have definitely achieved your second step in creating a budget.
 
3. identify or set an achievable goal: This is the third step in creating a budget when you have identified your income, tracked your expenses, and categorised them. Why I say achievable goal is that you have to set a goal that you can achieve either long-term or short-term. For instance, you might save money in order to pay your debts, invest the money, or even pay for housing and any other expenses, such as buying valuable and usable items that won’t be a liability to you.
 
4. Start creating the budget or priorities for your expenses: This is the next step, for me. This is the step where you will start writing the budget. It is not that you won’t write those other steps I mentioned earlier; you will also write them, but this is the stage where you will allocate some amount of money to the categories that you have created at the second step, and you have to make sure that it aligns with your priorities. After allocating a certain amount of money to those categories, you should make sure that you keep some of it as emergency funds; it is also important.
 
5. Review the budget; in some cases, I mean monitoring, evaluation, or adjustment of the budget. This is like the final stage in creating a budget, although this stage is a continuous process because this stage never comes to an end unless you have purchased all that you have put in your budget to achieve this process, including regular adjustments as needed to accommodate and adjust your budget. This is done in case something comes up, such as the use of the emergency fund that you keep as a category for things like an increase in the price of what you intend to buy for medical expenses, which might be an emergency, and many others. In this step, you must track your budget very carefully and with caution to make sure you have achieved it.
 
The steps I have listed above are the ones I follow whenever I want to write a budget. You can change this step in many ways. For instance, a gambler can use it, but it will be more effective with the amount he needs for the gambling, and he should make sure he follows the track, so stick to the budget to avoid the source of unusual spending.
 

Well, it's not bad, but the important thing about creating a budget to control your finances is to get started. At the beginning you won't have a perfect budget and you will see that as you make more monthly budgets you will include things you missed the month before. But over time you will have your expenses under control and then you will be able to save well. And to save better, when you have experience with your budget and you have been saving for a while, focus on earning more.

Thank you for taking the time to come up with these wonderful budgeting tips. It is vital to measure your income with your expenses and see the outcome. If you can save some money no matter how small after paying for your expenses, you have a good budget. But if you have to borrow to finance some of your expenses, then you have to readjust your budget.

I am not moved by festivals or holidays like Christmas. I still ensure that I spend within my means. If I don't have extra funds to finance house decorations, new clothing, or travelling for vacation,  I will have to drop them from my budget because they are not basic needs. I have always told people that we have to enjoy Christmas based on what we have and we should never borrow because we want to celebrate Christmas in a big way more than what we can afford. We shouldn't lose sight that January comes with a whole lot of bills.

To properly plan a budget, it is necessary to divide expenses into fixed (payment for an apartment, transportation to work, interest on loans, communication services, etc.), variable (food, clothing, medicine), and optional (entertainment, cigarettes). It is also necessary to exclude purchases based on emotions. In the end, by analyzing your expenses, you can significantly reduce them

Today, it is not important what people might think of you. Because what all matters now is how you deal with your own life and problem. Identifying it and creating budget for your expenses is a wise thing that everyone does now because of your habit is to spend mindlessly, you will have to deal with the consequences later on. That is why you will hear people telling that you should just spend according to your income abd that is living according to your means and living beyond your means. Living frugally as you follow all of those things mentioned by OP will even make you live better.

You got it right but the most important and key step from all those points is having priorities. One must set proper priorities on their expenses. Most people fail to create a "budget" plan and remains broke by the end of the month just because of spending money on things they could have "lived" without. They give priorities to "useless" things and then they end up struggling to pay their bills. If paying bills is your priority, pay that first. If paying your debts is your next priority, then do that. "Saving" can also be a priority. After you are done saving, the rest of the money that is left is yours to spend on anything you want. Budgeting is not as complicated as people thing. As long as they keep themselves organized and spends responsibly, they will always be able to follow their budgets.

Honestly, setting up a budget is a small thing but along the way, we abandon to stick to it due to some unforseen circumstances. The emergency funds is missing in your list and it's very necessary because it is among the things that make it difficult to stick to budget especially when you allocate a small amount of money to it and it hit you hard in unexpected ways. Vehicle repairs and health issues are good examples of this. It's a good idea to always include an emergency fund category in one's budget with a reasonable amount allocated to it in order to cover that types of expenses whenever it occurs.

Importantly, you need to set goals for your budget and once you have the goal, creating a budget will be easier as long as you can stick to it as designed.

1. Determine your income: As the first step in creating a budget, you have to know your total income in terms of what you can afford. Do not write a budget that is more than your income and end up not achieving anything at the end because your income determines your budget, so let's take note of our income first. This income might include your weekly,monthly, or even yearly income, as well as side hustles and any other source of income.

2. Identify where your money is going: The second step in creating a budget is to track your expenses. This is also very important because, without knowing how you usually spend your money, you will end up writing a budget that you can’t even stick to. More over, expenses include housing, transportation, food, entertainment, gambling, and so on. When you have identified where your money is going, you can categorise it into groups. For instance, clothing, house rent fees, and others should all be in the category of housing. If that is done, you have definitely achieved your second step in creating a budget.

You have forgotten the simplest and most basic thing of creating a budget but it's one of the most important thing and that's to list all of your expenses and where your budget is going. With that, you'll be able to track your expenses and you know where it will be spent. Because if you don't have that list and you're good at the other things, how are you going to track them all? You've listed about #4 as creating and writing the budget but I think that should be at the top together with determining your income/expenses.

You have forgotten the simplest and most basic thing of creating a budget but it's one of the most important thing and that's to list all of your expenses and where your budget is going. With that, you'll be able to track your expenses and you know where it will be spent. Because if you don't have that list and you're good at the other things, how are you going to track them all? You've listed about #4 as creating and writing the budget but I think that should be at the top together with determining your income/expenses.

I agree with your point about determining income, I see that determining income is the key to realistic budget limits. While the comparison between income and expenses I think can play an important role to determine income. However, if we want it to be even better, we have to separate the prioritized expenses and even record them every time there is an expense so that they can be controlled.

I am not doing it right now, but I used to do a method that I learned from "friends" tv show. Obviously that was in the 90's so it was quite possible, and it was set in the USA so it was even more possible, not really possible here where I live currently with world record breaking inflation rates we just had in the few years, we had %100+ inflation rates, for a few years, and my income didn't go up like that, so this method is for people who live in a bit more stable places. Just put certain % aside every single time you get a paycheck and assume whatever left is your salary. So you get 1000 dollars a month? Put 100 aside and imagine you get paid 900 and then that 100 is not available, it never existed, you never got paid it, its somewhere safe, like a bitcoin investment, or gold, nothing crazy like futures or margin, and you just keep doing that for a few decades and you should be able to retire rich.