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Nurses, Heres How To Create A Budget In 5 Steps
Date Posted: 05/Jul/2018
Having control over your money and not the other way around is very important to your financial health. In fact, it determines the way you live, the kind of financial decisions you make, what sort of holidays you can go on, whether you can retire early and so on. A budget is one of the most important tools for understanding your cash flow and when used right, managing and having control over your money. 
 
Quickly, what is a budget? A budget in simple words is a financial tool that displays your income and expenses. A budget enables you plan for the income you’re expecting in the nearest future, matching it with the expenses you’re expecting to make in the same time frame. This gives you some knowledge and control over what your money does and how it is spent.
 
So how do you start out creating a budget? There are guidelines like The 50:30:20 Rule To Budgeting that helps you budget. Here is a breakdown of the guideline in 5 very simple steps.
Step 1. Know your Take Home Income
First, figure out how much your take home is at the end of the month plus any profit from side business. For some it is a fixed amount/salary while for others it fluctuates. Having an ‘idea’ of your income or just imagining a superficial number does not work when setting a budget because you cannot or rather should not, budget on an imaginary number. When you’ve figured out your take home income, put it down.
 
Step 2. Figure out your essential expenses and subtract that again from your take home
It is important to work with your essential expenses first so you don’t get carried away. There will always be things to buy and experiences you’d like to spend on which are easy ways to drain your money. A budget helps you make the best use of your money.
 
So, make a list of your essentials expense or expenses you must make. These expenses are either necessary for your survival or are of priority to you. Generally, these may include rent, utility bills, food, transportation costs, the children’s school fees etc.
 
Step 3. Decide a percentage for Savings/investment and subtract it from your take home
One of the great things about using a budget is it helps you develop good financial habits. One of which is saving/ investing. After you have figured out how much you will be taking home at the end of the month, decide how much percentage you want to give to savings/investment. It could be 5%, 10%, 20%, etc. depending on your financial responsibilities and personal preference.
 
Ideally, from the 50:30:20 Rule, you should be able to budget 20% of your income for saving or investing. Subtract this percentage from your take home income.
 
Step 4. Figure out and subtract the Nice-to-haves from your income (Discretionary Expenses)
This is the part meant for the other expenses that are nice to have which may include eating out at a new restaurant, buying new outfits, taking a vacation, paying down debt etc. Don’t go overboard with it though. Better yet, make a list of all the nice things you would love to have or do. Also make a list of their estimate costs. Figure out if what is left from your income at this point can cover the costs. Otherwise, prioritize your list and strike some things off for next time.
 
After you have come up with your Nice-to-Have expenses, subtract them yet again from your take home income.
 
Step 5. Compare and Choose a Method to Practice your budget
Figure how much you spend each month currently. You can do this by looking through your bank statements and receipts. You might find yourself saying ‘Wow, I paid this much? I don’t even remember buying that.’ Now compare the way you spend with the way you should be spending. Do you need to cut costs somewhere? Are you spending more than you earn?
 
If you notice, what you have done is to divide your money into different sections to make sure that you are making the best use of your hard-earned money. Another way to do this is with the 50/30/20 GUIDE TO BUDGETING. Now that you know how much you should be spending, choose a method of implementing your budget. Try the envelope method or try automating your expenses.
 
Many fail at keeping a budget because they fail to realize that a budget is flexible. It can be changed whether your income rises or falls. The important thing is to keep trying to figure out what works best for you and then continuously practice until it becomes a habit.
 
What is this 50/20/30 Gibberish anyway?
It’s pretty simple. The 50/20/30 Budget Rule is a guideline that divides your income into three spending categories so your spending becomes salient and easy to track.
 
How Does It Work Then?
First off, you’ll need to add up ALL your sources of income (main job, side job, contract job etc.), no cutting corners. This is the income we’ll be working with.
 
50% of your income goes to your living expenses and essentials that you really cannot ‘live’ without. They include your rent, utilities, feeding (groceries), transportation (or fuel) and so on. This is your grey area because you need to be clear and truthful about what you ’need’ and what you just ‘want’.
 
20% of your income is dedicated to your financial goals, for example, your savings goals. 20% should be your lowest percentile. Meaning though these percentiles are subject to change, you shouldn’t go below 20% of your income when it comes to your savings. Some people go 30% or even 70%, this depends on you but 20% should be the cut off mark.
 
30% of your income goes to your flexible and lifestyle spending. Basically things that you ‘want’ but don’t necessarily ‘need’, for example, a vacation, movie tickets, eating out and such.
 
Although the 50/20/30 budget rule is flexible enough for you to make it work better for you, it is advisable to start with it first and see how well you can manage and track your cash. The work isn’t in creating the budget, it’s in disciplining yourself to actually live within the budget.
 
Denying oneself of some regular pleasures isn’t something a lot of people are used to. When it comes to being frugal and turning a blind eye to some selfish enjoyments we often cringe inwardly. But the thing is, if you don’t get your budgeting right and monitor your spending, it won’t matter how many jobs you keep or how much you make because by and large, your finances are going to get pretty ugly.
- RenMoney

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