Financial Education (US)

Why do budgets matter? 15 simple tips to improve your finances

Do you want to make the best of your income? Read more to see 15 simple tips to help you improve your finances and understand why budgets matter so much!

If you want to know why budgets matter, you are in the right place! Source: Gettyimages
If you want to know why budgets matter, you are in the right place! Source: Gettyimages

Do you want to pay for bills, food, and all your other needs and still have money to have fun? On top of all these expenses, you might also have to save some money to achieve a life goal. You might think that it is a lot to manage, but creating a personal budget can be your solution. And that is only one of the reasons why budgets matter so much.

Everyone can benefit from budgeting. But maybe you think that having a personal budget is not for you. Maybe you have tried to budget before, but it didn’t work so well. If that is the case, we recommend that you keep trying to improve your budget by reading good tips. With time, you will be able to see how much you have improved your finances.

We will give you important information about personal budgets and tips to help you create your first budget or improve the one you already have. So, keep reading to learn our important budgeting tips and understand why budgets matter in the process!

What budget means?

A budget is a financial plan based on income and expenses. It is used by individuals, companies, and even governments. Having a personal budget can help you understand your current income and expenses and improve your personal finances.

Budgeting helps you pay for your needs, save money to achieve a goal, and have fun as well. This is why budgets matter a lot for those who want to have better financial health. Also, if you want some tips on how to improve your personal finances in 2021, check out our post below!

How to improve your personal finances in 2021

How about improving your financial life before the year ends? Here are 10 simple rules to help you improve your personal finances.

How do you create a budget? 15 tips to help you budget better

Check some great tips to guide you and show you why budgets matter! Source: Gettyimages
Check some great tips to guide you and show you why budgets matter! Source: Gettyimages

Search for budgeting methods

There are many different budget methods, so you can definitely find one that best suits your financial needs. So, before you start creating your budget, try to learn more about the many different types of methods.

Start simple

If you are a beginner in budget planning, the best thing can be to start simple. Starting with more complicated methods and spreadsheets might make you want to give up on organizing your finances. You can create a simple spreadsheet and start writing your income, after-tax income, monthly expenses, and savings. If you want, you can even write them on paper.

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Set your goals

Budget planning will definitely help you achieve any goal you are working toward. But for that, you need to think about what you really want to save for. If you don’t include short and long-term goals in your budget, you might not feel motivated. Therefore, even if it is just saving for a vacation or buying a house, always keep your goals in mind.

Check your past expenses

A good way to understand how much money you need every month is by checking your past expenses. You can look at your account statements, and some banks have apps that already categorize your expenses for you. After scanning your past expenses, you can plan your budget more realistically.

Think of possible emergencies

Life is full of surprises, but you can prepare for them by saving some money just for any future emergency. So, always think of possible emergencies and include them in your budget.

Include your taxes

When creating a budget, some people might consider their full income, but you need to consider your after-tax income. Before including your total income in your budget, don’t forget to calculate your taxes to work with your actual usable income.

Pay your debt first

If you have debts and don’t know how to settle them, having a budget focused on paying them is a great option. If you start your budget by not putting your previous debts as one of your priorities, you might get caught in an illusion that everything is under control.

You can organize your personal budget by setting the payment of your previous debts as a short-term goal. With that, you will be able to take care of that problem a lot faster and prioritize other life goals.

Automate your savings

If you have a fixed income, a good tip for improving your budget is to automate your savings. You can schedule to transfer your pre-determined monthly savings from your checking account into your savings account. You can open a retirement account and automate your retirement savings. And if you have kids, you can create a college savings account.

Learn to adapt

You have to take into consideration that in some months you will have to spend more than others. Maybe it is school supplies, a gif you have to buy for the birthday of a loved one, or holidays, either way, if you plan, these expenses won’t be a reason for stress.

Try the 50/30/20 budget method

If you are trying to create your first personal budget or you have tried to create one, but it didn’t work so well, we recommend the 50/30/20 method. Basically, this method separates your income into three categories: 50% goes to needs, 30% to wants, and 20% to your financial goals. This is a great method because it shows you that you can still have some money for yourself.

Use helpfull apps

Some people like to write down their expenses by creating their budget using a physical method, and that is great. But if you like a more digital approach, you can use helpful apps to automate your budget planning.

Personal finance apps can categorize your income and expenses and input them automatically. But keep in mind that they would need to link your bank account to their system. So, it is okay if you are not comfortable with that.

Create a schedule

You can schedule your expenses, try to set a date to buy your groceries, pay your bills, and pay for other frequent expenses. You can set a date and time to check and update your budget. If it helps you, set up an alarm on your phone as a reminder.

Follow the basics

We know that there is a lot of information out there to help you with your budget, and that is really great! But it can also be a bit overwhelming for some people. So, here are just the basics for your budget:

  • Know your total income and calculate your after-tax income.
  • Calculate your fixed monthly expenses and needs.
  • Know how much you need to save to achieve your life goals.
  • Determine how much money you need for activities like going out, having fun, hobbies, and others.
  • Keep improving your budget.

Don’t forget to have fun

It is okay if you are comfortable with not buying something for yourself, investing in some hobbies, and other things. But you might want to leave some space for fun activities in your budget. The purpose of creating your budget is also to give you more freedom and reassurance in life.

Don’t compare yourself

Respect your own time and don't compare yourself too much. Source: Gettyimages
Respect your own time and don’t compare yourself too much. Source: Gettyimages

This last tip is a very important one because it can help you understand that everyone has their own time. We demonstrated why budgets matter a lot, but that is only a good thing if you don’t compare so much. If you compare yourself with others, you will probably never think that your budget planning is good enough.

Try to always look back and see how much you have improved. The perfect budget method for you will come with time and constant improvement. You have to understand your needs and keep looking for important tips like the ones we have here.

If you liked our budget tips, we recommend that you read our tips on how to save money in 2021.

How to save money in 2021: 14 super easy tips!

In 2021, we are looking for solid ways to save money when buying and when spending. So check out these 14 easy tips on how to start!

About the author  /  Victória Lourenço

Victória Lourenço is part of the finance writer team for The Mister Finance website. She is a translator and copywriter, having worked on finance topics for over four years. She has a goal to keep studying finances to help people learn more about how to use their credit cards, make loans, and use other money-related products in a way that they can find a more meaningful and healthy financial life!

Reviewed by  /  Aline Barbosa

Senior Editor

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