As trying as this Covid-19 pandemic has been, I know many if not the most of us young professionals have been taking a hard look at their personal finances. Whether’s its actual layoffs or fear of layoffs, worrying about our financial future or our present financial situation, many of us might be rethinking how we manage our money. Managing personal finances is essential for every young professional (well actually everybody) that wants to gain control over their expenses and savings. For many of us that are beginners with effectively managing their money and/or budgeting, it can be a bit overwhelming to know how to start!

Fortunately, there are systems and apps you can use to pay off debt, calculate savings, build a good credit score, and achieve your financial goals. Keep reading to learn how to set up a simple budget and make better financial decisions for you and your family.

Analyze Your Current Spending Habits

Before you start tracking your expenses, analyze your current spending habits. On a spreadsheet or a piece of paper, write down how much you spent in a day and where. Include cash and credit card expenses, and list everything immediately after spending.

To get an accurate representation of your budget, try to spend at least 30 days tracking your money every day. If there’s more money going out than coming in, you’re not managing your money wisely. Don’t be too surprised or disheartened by what your find – it’s all a process!

List Your Monthly ‘Fixed’ Expenses

People who don’t track their expenses are often shocked when they see how much they spend on unnecessary things (mostly on eating out I find). To find out what your monthly spending includes, make a list of mandatory monthly expenses.

These include utilities, groceries, gas or transportation, credit card fees, mortgage or rent, loan payments, and insurance. These do not include occasional expenses like gifts, entertainment, travel, or medical fees (unless they’re regular expenses). It’s important to understand the ‘table stakes’ for continuing to live a normal life, and these ‘fixed’ expenses will help establish the baseline.

Figure Out Your Monthly Income

This may be a simple or difficult task depending on how and when you get paid, but as best you can, figure out your monthly income. A budget will consist of Income = Expenses + Savings/Investing, so having an accurate income will be important. If it’s the same each month, easy enough! If it varies, I recommend doing an 85% estimate of your average and budgeting off of that. Any extra you earn can simply be added into the budget to be spent or saved.

Create The Budget

To pull it all together, subtract your expenses (fixed and variable) from your monthly income and if there’s money left, you’re doing a good job. If you break even or get a negative number, you should make adjustments to either your income or your spending. Remember: Income = Fixed Expenses + Variable Fun Expenses + Savings/Investments.

Set Financial Goals

If you don’t have a destination in mind, you’ll certainly never arrive. So, the key to budgeting for beginners is setting financial goals. Once you have a clear picture of your income and expenses, you can easily find solutions. Feel like you in too much debt? Try online loan lenders to refinance at a lower interest rate. Saving for a big goal? Open an online bank account that’ll pay good interest. Trying to save for retirement? Set up automatic withdrawals to an IRA (individual retirement account).

Alternatively, if you’re not able to cut expenses, you’ll need to increase your income. Set an income goal and find ways to earn extra money, perhaps extra shifts at work or a side hustle. Finally, set a goal on your expenses and stick to a certain amount of spending and savings per month.

Get a Budgeting App

Now that you understand that basics of a budget, the question is now how to make it happen. You can go old school like I do and use a spreadsheet, or there are lots of budgeting apps out there to help track your income and expenses in just a few clicks. With apps like Mint, PocketGuard, EveryDollar and You Need a Budget, you can see exactly where your money goes and whether you have some expenses that seem small but take up a big chunk of your budget.

You simply install the app on your phone, enter your bank account details, and connect the app. You can also track your credit score, and divide the expenses by categories.

My only complaint with budgeting apps is some of them make it too easy, and we don’t check or maintain our budget like we should! Make sure whatever solution you adopt works for you in helping you achieve your financial goals!

Creating a Simple Budget Is Easy With These Tips

If you’re new to budgeting and don’t know where to start, these tips will help you create a simple budget to track your cash flow. By knowing where your money goes, you’ll be more conscious of your spending and will always stay on top of your expenses.

Want more personal finance and budgeting tips? Read some of the other articles on our website and stay tuned for the latest news and updates.

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