Man drinking coffee and budgeting his money.
Budgeting & Saving

Budgeting and saving are two important financial skills that everyone should learn. By creating a budget and saving money, you can take control of your finances and reach your financial goals.

What is a budget?

A budget is a plan for how you will spend your money. It is both a record and a limit for how much money you are able to spend over a particular period of time. Creating a budget can help you track your spending—and sometimes overspending—to keep you more financially healthy.

Why is it important to budget?

There are many reasons why it is important to budget. Here are a few:

  • To save money. One of the best ways to save money is to create a budget and stick to it. By tracking how you’re spending your money and making sure that it stays within a set range, you can better save money each month.
  • To reach your financial goals. Whether you want to pay off your student loans, save for a down payment on a house, retire early, or travel the world, budgeting can help you reach your financial goals. By setting spending limits and tracking where your money is going, you’re better able to save money each month and possibly reach your goals faster.
  • To avoid debt. If you do not have a budget, it is easy to overspend and end up in debt. Keeping to a budget means you are less likely to spend beyond your means, falling into debt and racking up high-interest charges.

How to create a budget

There are many different ways to create a budget. Here are a few tips:

  • Track your expenses. The first step to creating a budget is to track your expenses. This means writing down everything you spend money on for a month or two. That includes your rent/mortgage, utilities, and bills, as well as what you’re spending on food, clothing, movies, etc. Once you’ve tracked your expenses, you can start to see where your money is going.
  • Tally your income. The next step is to create a list of your income. This includes your salary, any other sources of income, and any government benefits you receive.
  • Create your budget. Once you have your income and expenses, you can subtract your expenses from your income to get your monthly budget.
  • Stick to your budget. The most important part of budgeting is sticking to your budget. This means tracking your spending and making sure that you are not overspending.

Although sticking to a budget is a smart financial habit, make sure you give yourself some wiggle room for unexpected expenses. You may have a subscription that is paid annually or a regular vet visit that doesn’t occur each month. Don’t build your budget so tightly that those expenses aren’t being accounted for.

Saving money

Saving money is another important financial skill. By saving money, you can build a financial cushion that can help you weather financial storms. Saving money can also help you reach your financial goals, such as retirement or buying a house.

There are many different ways to save money. Here are a few tips:

  • Set a savings goal. The first step to saving money is to set a savings goal. Determine an amount that you’d like to reach and that will give you the cushion you need to keep going in the event of an emergency. For this first goal, make sure it’s something you can attain. This will help you stay motivated and on track.
  • Create a savings plan. Once you have a savings goal, you can create a savings plan. This means determining the amount of money you can comfortably save each month. Even an extra $20 a month will help you reach your savings goal.
  • Make a budget. As discussed earlier, a budget can help you track your spending and make sure that you are not overspending. Build that monthly amount into your budget so you can reach that savings goal.
  • Cut back on your expenses. If you are struggling to save money, you may need to cut back on your expenses. This means spending less money on things like entertainment, eating out, and shopping. Keeping an eye on your budget can help you know where the cuts can be made.
  • Automate your savings. One of the best ways to save money is to automate your savings. This means setting up a direct deposit from your paycheck into your savings account. If you don’t see the money in your account, you’ll be less likely to spend it.

Conclusion

Budgeting and saving are two important financial skills that everyone should learn. By creating a budget and saving money, you can take control of your finances and reach your financial goals.

This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.

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