How to Make a Budget when you are Terrible with Money

Do you always wonder why and how your money disappears? As if it has some kind of superpower to disappear with a poof? If the struggle seems familiar to you, perhaps you are not doing budgeting right, or perhaps you are not practicing budgeting at all.

But once again, for budgeting, you need to be good with money. I bet that’s your line of thought and probably the excuse you use to not do budgeting at all – you think it’s impossible for a person like you who’s terrible with money.

But here’s a truth bomb alert. You are terrible with money only because you’re not good at money management. To make the wrong right, budgeting is a sure-shot solution.

It’s not rocket science or chemistry equations you never solved right. Budgeting is easy – even when you think you are bad with money. Allow me to guide you through as someone who has never been good with a budget but finally figured it out!

How to make a budget when you are terrible with money

1. Before making any cuts, calculate your monthly expenses

It all comes down to knowing where you spend and how much you spend in a month. For that to happen, ditch the “I’ll

record the expenses later.” Notion. It’s not a great idea, as you won’t be able to remember each and every expense you paid for – especially cash transactions. So, make it a habit to record every transaction then and there.

Now I know, you wouldn’t be able to carry your laptop along with you, but you can carry a notepad or write it down in your phone’s notes. Make it a routine.

2. Categorize these expenses

When you are done recording your expenses, categorize them. For instance, any expenses on fruits and veggies would go in the grocery category, and so on. Once you are done categorizing each expense, see which of these expenses can afford adjustments. For instance, cutting down on grocery and shopping is possible, but fixed expenses such as rent, insurance premiums cannot be adjusted.  

Now, you know which areas of expenses you can make cuts and adjustments in and which are not adjustable. 

3. Prioritize paying debts

Now to determine how much you can cut, you have to know what other expenses you have to prioritize. This includes

paying debts. Some people don’t consider paying debts important enough – but it’s a very disastrous road to take. When you take money, it is your obligation to pay the people back – even when they don’t ask for it. So, prioritize paying your debts.

You would not be able to pay all debts together. So, it’s better to pay in little installments every month. Let your budget reflect debt payment – in fact, it would be better to reserve some portion of your monthly salary towards it.

Trust me, it’s better to be done with debts. You won’t just avoid troubles, but spare yourself a poor credit score and added interest.

4. Create reserves for necessary expenditures

It is not only essential from the perspective of your budget but for the future as well. Necessary expenses can include

education expenses, health expenses, and so on. It’s better to maintain reserves for these because a good education is vital and health is more than important. (You cannot trust time to keep its blessed hand on you forever.)

Let’s not forget about accidents, loss of work, or vehicle expenses. All of these things can pop up quickly and put you in more trouble if you don’t have a reserve to let you get to work or school still.

5. Start with cutting down in one area of expenses (See how much you need to cut)

Now that everything is done, it’s time to take action. You can start with one category of expense – say grocery. Try to cut your grocery expenses by 20% if you are just starting out. For instance, if your monthly grocery budget is $200, bring it down to $160. Surely there are things you can still get within the budget, and enjoy your life. Maybe you have stock in the pantry or refrigerator you can use as a substitute instead of pushing it back further on the shelf. Every little bit helps, especially if you are short on space and have a reserve already. 

6. Gradually, try to reduce in every area

Once you successfully meet the new budget, gradually go to the next categories of expenses. If you thought that you didn’t save much in one category, you’ll see the difference when you combine all categories of expenses.

As said before, try to cut down these expenses by 20% to see results. If you have one area you can completely cut but struggle to cut to 20% in another area but still stay in budget, know it’s ok. You still have to enjoy your life, not resent your budget. It can be something small also, it doesn’t have to be a huge expense. 

7. Make lifestyle expenses

There’s no point in making a budget when you don’t make the necessary adjustments to actually stick to the budget.

You have to accept that if you are to do budget and saving right, you have to make some adjustments – whether it is sacrificing weekly dinners at lavish restaurants or expensive breakfast options to pamper your taste buds. Actions are mandatory – no pain, no gain, right?

The more you are able to shift but make it comfortable so you can sustain, the better the future will be. I don’t recommend cutting out everything which will make you hate every day because that will keep any blessings away.

8. Make room for investments

Now with all the savings in hand, you can put it to wise use. A wise utilization won’t be keeping all the saved money in your bank account, instead, a wise call would be using some of that money to make investments to increase your wealth for the future.

If you want maximum returns, investing in the stock market is the option. However, if you’d like to start slow and safe, investing in SIP and Mutual funds can be a safe bet. If you want to save for retirement or another thing, setting up a meeting with a financial advisor might be a good place to start if you are new. They can point you in the right direction and help you understand what will work for what you want and how long. 

 

While it may seem daunting, creating and following a budget is doable once you break it down into manageable steps. Start by calculating your monthly expenses and then categorize them into necessary and discretionary spending. Prioritize paying off your debts and then create reserves for other necessary expenditures like rent or groceries. Gradually try to reduce all of your expenses, even your lifestyle ones, until you have room to invest in yourself or save for the future. Implementing just one of these tips can help get you started on the path to better money management. Do you have trouble saving money or budgeting? Which tip helped you get started? Let us know in the comments below!