How to draw your first budget

How to draw your first budget


Today is the day when you take your first step on the personal finance and budgeting journey. You decided you would create your first budget. If you feel a bit lost we will try to guide you in this blog post.

Everyone needs a budget and it’s never too late to start

Whatever your situation is, student, active or retiree, you need to know what’s happening with your money. The only difference is that your financial goals may be totally different. You shouldn’t give up or avoid budgeting especially if you have to manage a debt or if you need to live on a budget. So the first thing to start with is to set a list of financial goals. What do you want to achieve with your money? Take a blank page and write a few realistic goals. If you’re a student, your goal may be not to overspend and to start building up some savings. If you just got your first job, you might be thinking about buying your first house. If you just had a baby, you can also want to start saving for your child’s education.

Make a list of your income and spending and categorize them

Unless you have tons of money or you’re a freelancer doing thousands of different jobs, the income part shouldn’t be too difficult. You know what comes to your bank account at the end of the month. You should categorize your income anyway especially if it comes from more than one source. For example, as a student you may have received a study grant or loan and your family is maybe helping you financially. And it’s likely you got some money from a summer or part time job.

The spending part may require a bit more work. Start with the basics: rent, food, utilities, medical, insurance, clothing, going out… You will need the help of your last bank statements to create categories. Try not to put too many things into miscellaneous!

Establish your first budget

You have expenses that you always have to deal with and for which you already know the amount. Budgeting for your rent, insurance and such won’t require any thinking but are big priorities. Then you have necessary spending that you can optimize such as food and groceries or transportation. What about starting using your bicycle to go to work? If you know how much you’re spending right now, you may want to save a few more dollars while not ending up only eating pasta at the end of the month. Finally you have all the expenses that fit your lifestyle. You may spend very little on clothing but a lot on traveling. And don’t forget to add an emergency fund and saving category. Life is unpredictable and you’d better be armed!

Now it’s up to you to set the amount you want to spend on each category. Once you have given yourself priorities, you will be able to optimize the less important spending categories. You will also need to track how much you spend and readjust each month. OK, it’s not the funniest thing in life but just think about it as sports: at first it’s difficult before becoming a habit and maybe even a need!




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