Why Is Budgeting Important

A good budget can help you to keep track of your cash flow, analyze your spending patterns, and adjust your expenses as necessary. Whether you prefer to write it down or use a tool like the Hiatus app, personal budgets will help you avoid headaches down the road.

With a little bit of effort and thought, creating a personal budget can be the first step toward achieving your financial goals, whether that is saving for a vacation, paying off debt, or investing in your future. 

Some of the reasons you should start budgeting include achieving financial independence, living within your means, and having a clear understanding of where your money goes. Additionally, having a plan in place helps reduce stress related to finances by allowing you to feel confident about your income and expenses, and to make informed decisions about how you spend your money. 

Why You Need A Personal Budget

If you're looking to take control of your finances, budgeting is a must. But with so many factors to consider, it can be tough to know where to start. Here are a few reasons why it’s a good idea to use a  personal budget. 

First, a personal budget gives you total control over your money. By tracking your spending, you can start identifying areas where you can make improvements. Plus, you'll finally have a clear sense of how much you're spending on all of life's essentials-- from rent to groceries to nights out with friends. 

It’s easy to lose track of your finances and spend way beyond your means without a budget. If you do decide to create one, you'll have the tools you need to save, prioritize your spending, and achieve your financial goals-- all on your own terms. The Hiatus app allows you to create custom categories so you can see exactly how you’re spending your money. 

Types Of Budgeting Methods

While creating a budget can seem overwhelming, it’s important to look at the different budgeting methods and go with the one best for you. Here are a few budgeting methods that you can consider:

• Zero-based budget: Zero based budgeting is simply income minus expenses equals zero. This budgeting method takes into account all of your income being budgeted before it's spent. People with set incomes or at least have a ballpark idea of their income are good candidates for using this budgeting method. 

• Pay-yourself first (80/20) budget: The two main focuses for the pay-yourself first budget are savings and debt repayment. If you want to follow this method, you should take 20% of your income, after taxes, and put it into a savings account. The remaining 80% should be used to pay for your expenses. 

• Envelope system budget: Similar to the zero-based budgets, the envelope system involves withdrawing all of your income in cash and separating the cash into envelopes labeled for the different categories it will be spent on. Whenever you want to buy something which would come from a certain budget, you take the money from the corresponding envelope and buy what you need.

• 50/30/20 budget: This method breaks down your budget into three categories - essentials, savings, and everything else. 50% of your income goes to essential things like rent, groceries, transportation, etc. 20% of your income goes to your savings and 30% goes to everything else (eating out, personal purchases, whatever you like to buy).

• 70/20/10 budget: This budget is broken down into three buckets - essential expenses, savings and investments, and debt payments and donations. 70% will go towards your essential expenses like rent, credit card payments, groceries. 20% will go to savings and investments and the last 10% goes to any extra debt payments or donations.

How To Create A Monthly Budget

When it comes to creating a budget that fits your needs, there are some things that you should consider:

Determine your Monthly Income

Knowing how much money you earn each month is essential in creating a personal budget. This includes your salary, bonuses, benefits, and any other sources of income. If you’re self-employed or a freelancer, you can estimate your monthly income based on your previous earnings. Make sure to include all sources of income, including side hustles and passive income streams. If you're making $10,000 a month or $2,000 a month, you'll be able to know how to budget your money better.

Track your Monthly Expenses

The next step is to track your monthly expenses, including food, housing, utilities, transportation, entertainment, and other miscellaneous costs. The Hiatus app is a perfect tool that will track all of your expenses in one place. You can categorize your expenses and make a list of your fixed and variable costs. Fixed costs are those that stay the same every month, while variable costs fluctuate month to month.

Set Realistic Goals

Now that you have a good understanding of your income and expenses, the next step is to set realistic savings goals. This step is crucial in creating your personal budget since it helps you determine your monthly savings target. Decide how much money you want to save each month and allocate a portion of your income towards that goal. Make sure it’s achievable and reflects your financial priorities.

Reduce Unnecessary Expenses

Reducing unnecessary expenses is one of the most effective ways to save money. Evaluate your expenses honestly and identify where you can cut back without sacrificing essential needs. You can start by eliminating subscriptions you don’t use. In this day in age, most of us subscribe to just about any streaming service. Why not switch to just one? An app like Hiatus can cancel any unwanted subscriptions for you. 

You can also switch to a more affordable grocery store, reduce dining-out expenses, and even look to get lower rates on your monthly bills to help cut costs. The Hiatus app can also see how much you spend on your monthly bills and negotiate better rates for you. Small changes can make a big difference in your budget.

Monitor and Adjust Your Budget

Monitoring and adjusting your budget is an ongoing process. Revisit your budget monthly or quarterly to see if you’re staying on track with your goals and lifestyle. If you find it hard to stick to your budget, you may need to adjust some of your expenses or savings goals. The goal is to cultivate good financial habits that will serve you well in the long run.

Wrapping It Up

Taking control of your finances with an effective personal budget can be empowering. Understanding your financial resources and creating a plan to manage them wisely will benefit you significantly in the long run. The benefits that come from budgeting are hard to ignore: it can help alleviate stress, lead to better understanding of spending habits, and protect against financial uncertainty in the future. The budgeting feature from Hiatus can make your money headaches become one of the past. Having a strong financial backbone should be seen as an investment for yourself and your family. Developing a reasonable strategy for your money will improve peace-of-mind and put you at ease so you can focus on what really matters in life—a priceless commodity indeed.