How to prepare a budget for 2021.
With all the difficulties we had to deal with in 2020, one of the biggest topics is: how can we administer ourselves better? Particularly in the financial department... After facing significant income cuts due to unemployment, millions of people have struggled to pay their bills, let alone their accumulated debt. There is a conversation not everyone is ready to have: how many people actually saved up or worked towards securing their future when the economy was at a peak? We recognize that not everyone has the financial literacy or even the possibility to invest, yet it is possible for everyone to create a budget and live responsibly according to our income.
The beginning of a new year is the best time to review and/or to create a budget to set us up for each month. So let’s talk about a plan to prepare a budget for 2021. Here’s what you will need:
Gather all your expenses. Your income: your job’s salary, a list of any other gigs that are bringing you cash. Your bills: your rent, car payment, services you pay for (phone, internet, utilities), subscription services, credit cards, etc. If there are people who depend on you (say, young children), make sure to include those expenses too.
Open up a spreadsheet on Excel or Google Sheets and create a budget calculator that includes all of the above. Begin by listing your gross and net income (after taxes have been deducted). From there, I would recommend that at least 5% of that goes to a savings account.
Now, it is very likely that your rent/mortgage is your biggest bill. List it right underneath your income, followed by your car payment (if applicable). Next, list your insurance, credit cards, and any loan payments. Right after, the services you pay for, and then your grocery, and health and hygiene products monthly average. Once you have that list, you should add things such as entertainment, transportation (gas), and any other expenses such as a gym membership.
A friend of mine created this super handful budget calculator for me years ago, and up to this day, I still use it! You are more than welcome to copy and paste it into your own spreadsheet. It comes with formulas that automatically subtract your expenses that way you know how much you are leftover! All you have to do is fill in the column with your own information.
Now, a crucial tip on saving and living with less worry is to live within (or under) your means. A vast majority of the population is living paycheck to paycheck, so it might sound a little bit tone-deaf to ask you to live “under your means,” yet I am sure we can all agree that if we cut back and lived with mostly the essential, we would feel less of a strain when at the end of the month we have to pay our bills. It is indeed a little disappointing to not feel financially free, but if you are working towards an educational and career goal, then this type of restrictions are temporary! Hopefully, by creating a budget, you will stay on track to get closer to your financial goals as well.