A core part of saving effectively is having a budget that captures all your expenses and the amount you plan to save. A budget can help you to create financial stability, track expenses and save for major expenses like a house, car, or tuition.
Here are five tips to help you create a budget to facilitate your savings:
1. Calculate your income– The first step to creating a budget is to calculate or make note of your income. That will give you the total amount you are taking home and give you an idea of how much you can afford to save and spend.
2. Make a saving goal– Save at least 10 per cent of your income. If you can afford to save more, that would be even better. Some financial coaches recommend the 80/10/10 rule – that is 80 per cent towards expenses, 10 per cent towards savings and 10 per cent towards charity. It’s best to automate savings to ensure that you meet your saving goals every month.
3. Create an emergency fund– It is true that unexpected expenses can arise at any time. It could be car issues, unforeseen medical expenses or just any financial crisis that was unplanned for. An emergency fund comes in very handy in these instances.
4. Total your expenses– Add up all monthly expenses, starting with your needs, then your wants.
5. Set a spending limit and stick to it– After you have totalled your expenses, set a spending limit, and adhere to it. It is important to stick to the spending limit so as not to overspend and shorten the amount allotted for your savings or other expenses or spend more than you have.
Saving money can help you to meet several of your financial goals. Make a budget and start saving today!