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Posted under: Opinion

Where To Start: A Beginner's Guide To Budgeting

You know you need a budget. But what steps are you taking to make that happen? Have your past attempts ended in unfulfilled spreadsheets and an ever-shrinking savings account? You’re not alone, but past failure isn’t an excuse to give up completely. Budgeting seems like a relatively simple concept, but there are various methods that must be explored for you to find the one that suits you best. It’s about trial and error, but with the steps below, you’re sure to reach a realistic budget routine that works for you and your goals. Let’s get started!

Be realistic about what you spend

Before you create a budget, start by being honest with yourself about what you spend right now with no changes to your lifestyle. Track every dollar you put out, whether it be to bills, frivolous purchases at your favorite department store or late night pizza. Having that track record will help you to set goals you can stick to. Do this for a few weeks at least or go through your last few credit card statements

Set a goal for what you want to spend

Saving every dollar would be ideal, but it’s not realistic. When you think about the amount of money you’d need to spend to live comfortably and do something fun every once and awhile, what are you envisioning you spending? Write that number down.

Divide what you spend into categories

After observing your spending habits, it’s time to break down what you’re actually spending money on by category. Even if you just choose two to start with, go with necessary life expenses (rent, transportation, your cell phone bill, etc.) and then things that you want to prioritize because of what they will add to your life — such as money to visit your family, pursuing higher education or  that kickboxing class you love.

Don’t forget about debt or savings when budgeting

This is pretty self-explanatory. Your overall assessment of your financial state isn’t complete without taking into account where you want your savings account to be or what you owe to pay off your debt. If you need help setting goals around this, start simple. You should have about three months of your expenses saved, and as soon as you can pay off your debts, the better, because it will keep your interest from growing.

Try out different strategies

Have you tried budgeting apps such as Mint or personal trackers through Excel or Google Sheets? How about the envelope system? Some people do cash only or break their expenses into percentages — for example putting 20% in savings, 30% in flexible spending and 50% in fixed expenses. There are so many budgeting systems that are better for some rather than others. Maybe your system isn’t even created yet. Try out different things until you find what fits into your lifestyle. There’s no right or wrong answer — just one that helps you to stay on track with your goals and aware of your expenses.

No matter where you are in your financial journey, it’s never a bad idea to outline a budget to follow. Being responsible with your money starts with knowing what you’re earning, spending and saving. Your budget will bring you comfort and freedom. Start tracking!

Wells Fargo makes no warranties as to accuracy or completeness of information, including but not limited to information provided by third parties, does not endorse any non-Wells Fargo companies, products, or services described here, and takes no liability for your use of this information. Information and suggestions regarding business risk management and safeguards do not necessarily represent Wells Fargo's business practices or experience. Please contact your own legal, tax, or financial advisors regarding your specific needs before taking any action based upon this information.
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