Budgeting is a crucial aspect of any successful financial plan, but it can be especially challenging for those working in skilled trades. As a skilled tradesperson, you may experience fluctuations in your income, and unexpected expenses can arise. However, building a smart budget can be a simple process if you follow the right steps. In this post, we’ll outline ten simple steps to help you create a smart budget and take control of your personal finances.
Step 1: Determine Your Net Income
Your net income is the amount of money you earn after taxes and other deductions. If you’re an employee, your net income is typically reflected on your pay stub. However, if you’re self-employed, you may need to calculate your net income yourself. To do this, add up all your income streams and subtract any business expenses, taxes, and other deductions.
Step 2: List Your Regular Expenses
Once you’ve determined your net income, make a list of all your regular expenses. Include everything from rent/mortgage payments and utilities to groceries, transportation, insurance, and any other recurring bills. It’s essential to be comprehensive in this step, so you don’t overlook any expenses.
Step 3: Categorize Your Expenses
The next step is to categorize your expenses. Group similar expenses together, such as all your housing expenses, food expenses, and transportation expenses. This will help you get a clearer picture of where your money is going and identify areas where you can potentially cut back.
Step 4: Track Your Spending
To build a successful budget, you need to know where your money is going. Start tracking your spending by recording all your expenses, no matter how small. You can use a spreadsheet, a budgeting app like Mint or Personal Capital, or even a pen and paper. The key is to be consistent and diligent in tracking your spending.
Step 5: Identify Areas to Cut Back
Once you’ve tracked your spending for a month or two, review your expenses and identify areas where you can cut back. For example, you may realize that you’re spending too much money on dining out or subscriptions you don’t use. Consider reducing or eliminating these expenses to free up more money for other financial goals.
Step 6: Set Financial Goals
Setting financial goals is essential to a smart budget. Determine what you want to achieve financially, such as paying off debt, saving for retirement, or buying a house. Once you have your goals in mind, you can allocate your money accordingly to achieve them.
Step 7: Allocate Your Money
Allocate your money based on the financial goals you’ve set. For example, if you want to pay off debt, allocate more money towards debt payments. If you want to save for retirement, allocate a percentage of your income towards retirement savings. By allocating your money based on your goals, you’ll be more likely to achieve them.
Step 8: Build an Emergency Fund
As a skilled tradesperson, you may experience fluctuations in your income, making an emergency fund even more critical. Aim to save three to six months’ worth of living expenses in an emergency fund to provide a financial cushion in case of unexpected circumstances.
Step 9: Review and Adjust Your Budget Regularly
Your budget isn’t set in stone – it’s okay to adjust and refine it as needed. Review your budget regularly and make adjustments as your circumstances change. This could be changing your income, new expenses arising or reaching your goals faster than you anticipated.
Step 10: Stay Disciplined
Lastly, stay disciplined and focused on your financial goals. It’s easy to get distracted or discouraged, but remember why you built your budget in the first place. Whether it’s to pay off debt, save for a house or retire, staying disciplined and committed to your goals is the key to financial success.
Bottom Line
Building a smart budget doesn’t have to be complicated, and it can bring significant financial rewards. By following these ten simple steps, you can take control of your finances and achieve your financial goals. Remember that discipline, diligence, and adaptability are key to maintaining a successful budget over time. And it’s always a great idea to seek professional advice to get you started on the right track.
> For one on one or group assistance with personal finance, STR recommends that you check out the following resources:
> Inaccuracies with Bureau of Labor Statistics (BLS) data: Many of our blog posts will quote BLS data. SkilledTradeRescue.com has been able to identify that data quoted specifically for Skilled Trades can be as much as 50% LOW in many USA labor markets. For more information on these inaccuracies please visit the STR national labor survey page at the link below. On this page there is a video containing the latest information at the top of the page as well as other information. If you currently work in skilled trades, PLEASE consider participating in our national labor survey.
