Essential Steps To Starting Your Budget For Investing

If you do not have a financial plan but want to start investing, this post is specifically for you.

A financial plan helps you optimize your earnings while still enjoying life. People who do not budget may have difficulties making ends meet.

Other people would struggle to enjoy life when they follow a strict budget. So, where's the happy middle ground here?

People handle their finances differently, but it's great to have the perspective that a budget is a helpful partner in financial freedom.

Budgeting as a Financial Freedom Tool

According to Ramsey Solutions, financial freedom encompasses carefree spending due to the availability of funds.

The availability of funds does not equate to unlimited financial resources, however, it encompasses the wise use of limited resources.

Dividing your monthly income into appropriate sections for different functions is budgeting your money.

What Are The Components of a Budget?

The components of a budget are different for individuals.

Here are some of the components of a budget:

A Budget for Expenses

We all have varying expenses. Some of us pay for rent, mortgages, car payments, bus passes, etc.

Most people would include their student loan payments in their monthly budget. GOOD NEWS --> If you still need to apply for student loan forgiveness, take advantage of it. Here's the link.

A Budget for Long and Short-Term Savings

Another need-to-have part of a budget is your savings, which involves your short-term and long-term money goals. Short-term savings goals may include the money you need to buy your car.

A vacation may be a short-term or long-term saving goal.

If the vacation is in the next few months, it can be part of your monthly goals.

On the other hand, an international vacation for the next year may be part of your long-term savings goal.

A Budget for Investments

Another crucial part of a budget is your investments, and it helps your money work for you.

Moreover, it helps with financial freedom, which I know you are striving towards.

Furthermore, it can help you with your early retirement. Many of us have joined the FI/RE movement to have financial independence and retire early.

One of the secrets of investments is their ability to grow your financial resources explosively.

Creating Your Portfolio of Investment

One of the well-known investment strategies is diversification, which divides your total invested funds across different financial securities.

You can choose to allocate your funds to so many financial vehicles.

Examples of financial securities include bonds, stocks, and mutual funds. These financial instruments experience value fluctuations.

In investments, there is always a risk that the value of your investment will drop; however, there is an opportunity that its value will increase, and that's the part that makes us want to learn how to invest and figure this money thing out.

Diversify and Commit to Investing

Some people have an additional monthly income that allows them to invest more freely because of their disposable income.

The sad reality for many of us was that after the bills were paid, there wasn't any extra money left over, and there damn sure wasn't enough money to invest.

I became thrifty to have extra income outside my paycheck, and you can too. I started writing resumes on the side and even doing Instacart to make money to invest.

Creating s budget is the best thing you can do to get yourself on the right track if you need help figuring out where to start. If you know you want to learn to invest and want to have money saved over, take time for yourself now to make your future dreams happen.

This may mean you can only go to brunch some weekends with Lisa and the girls like you used to.

This may mean you can't take that girls trip with your line sisters every year.

You may have to pick up a second job or start a side hustle like writing resumes to make extra income. You're talented! Consider what people ask for your help with the most and charge for that. I was a resume-writing fool in college.

Please see this as an opportunity for you to save for your future. We're talking delayed gratification, baby.

A budget helps you commit to regular investing. Some people set a budget based on percentages.

For example, Lisa might assign 20% to invest and 10% to save. Also, Lisa might budget 60% of her monthly income for expenses and 10% for wants.

Your budget will depend on your needs and plans for the future. Ensure you take enough time to make a budget that works for you and doesn't feel super strict. Give yourself some wiggle room, or you will only stick to this budget for a little while. Budget who?! Budget what?!

If you need help making a budget, use this as an example. It's a simple excel calculator to budget and track all of your income + expenses.