Adulting 101: How To Create Your First Budget

Learning to manage money on your own can seem overwhelming. Here are step-by-step tips to help you create your first budget.

When you were a child, your parents or guardians may have given you an allowance, gifted you money, or paid you for completing chores. Now that you’re an adult, loved ones are no longer your primary source of cash, so managing money is even more critical.

The personal budget is the cornerstone of every sound financial plan; without one, it’ll be hard to move forward with your adult life. Budgeting is all about knowing where your money is coming from and where it’s going. Here is how you can get started.

Creating Your First Budget

Step #1 – Find The Right Tools  

The first step on your road to a personal budget is finding the right tools. Thanks to the internet, that’s easier than ever. If you want to go old school, you can use a pen and paper or a spreadsheet to track your money and develop a budget, but digital tools might make your job easier.

There are apps dedicated to financial planning and personal budgeting, so pick your favorite and download it to your phone. Once you’ve had time to explore the app, you can input your information and start building your first budget.

Step #2 – Set Up The Categories

If you download a smartphone budgeting app, it’ll likely contain a number of preset categories, including rent, groceries, gas, and food delivery. Those preset categories are a good start, but they may not be enough to capture your spending fully. Adding personalized categories will help you fine-tune and optimize your budget, making it easier to track your money.

Step #3 – Assess Your Income

Your budget will contain two separate sections: income and expenses. Now that you have a budgeting tool set up, it’s time to assess your income sources.

If you have a single part-time or full-time job, this part should not take long at all. Grab your pay stub and record the numbers in the net pay or income section. Things get more complex if you also have a side hustle or other source of income – you’ll need to include those figures on the positive side of the ledger.

Step #4 – Track Your Spending

The next step in creating your budget is to track your spending carefully. Once again, this task can be made easier through technology – some apps allow you to track your spending automatically or at least enter each purchase you make. Look at your spending from the past three months to get an idea of where your money is going.

If your chosen budgeting tool doesn’t have this feature, there are other spending apps you can download – some can even be linked to an account or credit card for easier and more accurate tracking.

Step #5 – Add It All Up

Now that your budget’s income and spending portions have been laid out, it’s time to add it all up. This can take some time, but those will be hours and minutes well spent.

Hopefully, your budget will show that you are spending less than you make; if so, you’re already on the right track. If the budget shows a deficit, it’s time to cut back. It can be challenging to spend less, but running a monthly deficit is even worse.

Step #6 – Revisit & Fine-Tune Your Budget

The final step on your road to a personal budget is to fine-tune the spending plan. As time passes, you’ll get a feel for where your money is going, making it easier to adjust expenses in the future.

It’s essential to know that creating a personal budget is not a one-time exercise. To be effective, the budget must be reviewed and fine-tuned every month. If you want your money to behave, you need to watch those dollars closely.

Summary

Creating a budget is your first step towards gaining financial confidence. Though it may not work out perfectly each month, it’s important to understand your spending guidelines and continue practicing these money-smart skills.

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