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How to make a budget and stick to it

Hang Su headshot

Hang Su

Rize Intern

Many still don’t see the value of budgeting, and maybe that’s because it’s too much work. However, it not only helps you sleep at night, but also gives you a clear sense of where you are financially. Plus, having the ability to handle unexpected surprises ahead is very mentally relaxing. For example, instead of panicking about that car issue, you can chill and say, “I have money for that.” That’s what happens when you pay yourself first! Now you’re probably thinking…how do I pay myself first, and how much do I allocate to each category? Well luckily, here at Rize we’re experts at that, so let us walk you through it.

1. Know your number. Find out your income and expenses are.

Let’s start with figuring out your monthly budget by taking in account your monthly income and expenses. Here is an AWESOME tool to discover your savings and spend money. We do this by identifying all of your income, your 9-5 job, a freelance job that doesn’t have a regular schedule, etc. Remember to subtract your automatic deductions for taxes! Your final number should be your net income.

Following that, list out all of your expenses and categorize them into fixed and variable expenses. Fixed expenses are monthly costs that you “need” to pay, such as rent, utilities (phone, electricity, internet), and car payments. Otherwise known as necessities. Variable expenses are expenses that vary each time, such as your morning lattes and occasional manicures (Everyone needs to treat themselves!).

Finally, subtract your total monthly expenses from your total income, and see if you are making more money than you are spending, and if so, how much?

2. Now it’s time to set savings goals.

There are two parts to creating savings goals. First, if you are spending more than you earn, (ie. your subtraction from step 1 is below zero), it’s time to cut back expenses so that you don’t go further into debt. Starting an “Emergency Fund” goal, or if you have debt, “Get out of Debt” goal may be a good place to start.

The second part of your savings goals is what you want to do with your disposable income --what you have left after all of the expenses. Instead of rolling it over to the next month or placing it into a general savings account, set up specific goals for the money to be allocated to. This can be that perfect vacation you’ve been dreaming of, or your plan to move out of your parents’ house in 6 months. Have a vision of the life you want to live, and save for that. In other words, give your money meaning! If you can’t come up with a specific goal, just start small and simply save -- pay an extra $100 to your student loan or save an extra $50 month.

3. Make it a habit and automatic!

It’s always easier to stick to your budget if you make things simple, such as making deposits run on an automatic schedule with an online savings tools, such as Rize. This ensures that you pay yourself first and can prevent you from overspending.

What’s our definition of “automatic”? No stress progress! If you save automatically, it takes away the effort in managing those complex budget Excel sheets. Imagine living the life you want while the hard part runs in the background of your life, without even thinking about it.

Overall, you’re setting yourself up for success by automating your saving and creating specific goals. So what are you waiting for, get started!