The Ultimate Guide On How to Live On A Budget

  • by Mansi Rai
  • 25-06-2021
  • 5 minutes
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The Ultimate Guide On How to Live On A Budget

If we’re being honest, no one wants to live on a budget. The idea of keeping track of everything you’re spending money on is just not that fascinating. However, when you’re moving out for the first time or starting your first job, learning to live on a budget becomes kind of necessary

Unless, of course, you’re trying to live from paycheck to paycheck or simply go broke. Then that’s a different story. That probably isn’t the case for most of you though, considering that you are reading this article right now.

When it comes to learning how to live on a budget, the first step is to come up with one that fits your needs. There are certain software and programs that can help you do this, and there’s no harm in paying for those facilities later on as you get more comfortable with budgeting. 

Right now, since it is likely that you are just starting out, a simple spreadsheet would do the trick.

So, how exactly do you create a budget?

Step 1: Enter your monthly income.

If you don’t have a fixed stream of income, enter the minimum amount of money you expect to make or have in a month.

Step 2: Separate your budget into four categories:

a) Essential Expenses: These are the things that you have to spend money on every month no matter what. You can’t choose to spend on them, they’re a necessity. Things like rent, student loan payments, and mortgages fit in this category. If you also make a point to put a certain amount of money in your savings account every month, it also belongs in this category.

b) Variable Expenses: These are the expenses you are required to make every month, but the amount you spend on them may vary monthly. For example, utilities, household supplies, and food are things you’d have to buy every month. However, the amount you spend on them could be high one month and low the next.

c) Non-essential Expenses: These are things that are like the name suggests, not essential or necessary. Hobbies, eating out, and that ‘necklace you absolutely did not need but thought was really cute’ are some things that fall in this category.

d) Intermittent Expenses: Things like taxes, which you don’t need to pay every month, are called intermittent expenses and fall in this category.

Step 3: Pull up 3-6 months of accounts statements

If you can, and note down where exactly you’re spending money. Try to fit them into the three categories.

free editable monthly budget tracker

Now that you (hopefully) have knowledge of how to come up with a budget, we can move onto the next important thing. If you’re saying to yourself, “How on earth do I stick to this budget?” This one’s important for you!

Coming up with a budget is hard, but actually sticking to it is harder.

Here are some things that you could do to actually implement, and stick to the budget you have come up with:

Set realistic, but motivating goals 

Why do you want to live on a budget? Is it because you want to get out of debt? Are you trying to live on a budget to save money for a new house? Maybe a new car? A phone? 

Whatever it is, write it down and put it somewhere so that you can see it every day. Use it as motivation to follow through with your budget and not get distracted. Learning to live on a budget is hard, which is why it is always good to set small goals for yourself. So, instead of trying to pay off all your student loans, first, try to meet a smaller financial goal. Then, you could start working your way up. 

Keep tracking your progress as that can also serve as motivation to keep going on.

Make a proper budget plan as well 

Here’s the hard truth. Coming up with a budget, and having no plan will take you nowhere. 

Once you have your budget noted down somewhere, there’s only one more step left. Write down how much money you have every month, then subtract the total amount you spend every month from it. BOOM, you have yourselves a budget plan. 

“Okay, but what’s the plan though?”, you might ask now. Well, the plan is to either start earning more or cutting back on how much you spend. Naturally, the first one isn’t as easy as it sounds. The next question that you probably have at this point is, “Well, how exactly do we CUT BACK on things?”

Fear not, we have got you covered.

Some ways for you to cut back on certain expenses when trying to live on a budget are –

 

1.Make sales your best friend: There is nothing to be “ashamed” of if you want to buy something that is on sale. It is actually a smart thing to do when trying to live on a budget. Especially when it comes to groceries. Look for ads, and try to find groceries on sale. Or you can try to figure out the pattern of sales at your local grocery store and remember to stock up on certain food items when they are on sale. 

2. You don’t have to empty your wallet whenever you go out: No one said learning to live on a budget was going to be easy. We are not saying you shouldn’t go out, simply because you are trying to cut back on expenses. However, you should stay aware of how much you should and shouldn’t be spending when you do go out. Try to find happy hour deals at bars and restaurants. They are a lifesaver.

3. Remember, you can always do things at home:  Sure, you might love going to the theatre, but you don’t have to go there for every movie you want to watch. Especially if you are trying to live on a budget. You can instead have a movie night at home. If you want to subscribe to a streaming service like Netflix, you could also split the cost for streaming services with a friend or relative.

4. You might want to get a roommate: The thought of living with someone might be intimidating, but this could help you cut down on rent by a lot. Finding a roommate is not easy. There are always fears, especially about things like compatibility. This is where apps like Codee can be of great help. Alternatively, you could also try finding a cheaper place for yourself. Don’t be afraid to move into a smaller place, if necessary. This way you won’t be paying a lot of rent. You can always save up and move to a nicer place later on.

Make it a game and Have fun with it: 

If you find yourself struggling with cutting back on expenses and learning to live on a budget, start thinking of it as a game. Ask yourself whether you can go from spending 100 bucks on something to 90 bucks and so on. Also, test your limits. If there is something you really want that you don’t absolutely need to get, see how long you can go without buying it. If you decide not to buy it, treat yourself with a smaller treat. 

Conclusion

Remember that learning how to live on a budget is a process. It is not simple and may take a while to get used to. The important thing is to keep in mind WHY you are doing this, and know that you CAN. Luxuriously living on a budget is not impossible.

Download Our Budget Tracker Here!

So, make a budget plan and get to work. Best of luck!


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