As a skilled tradesperson, you might think that budgeting is a task reserved for people who work in finance or accounting. However, creating a budget can be vital to your financial success and wellbeing. Budgeting helps you manage your income and expenses, track your spending, and avoid overspending.
Moreover, budgeting can help you achieve long-term financial goals, such as purchasing a home, paying off debt, or saving for retirement. According to a study conducted by the Federal Reserve, only 36% of Americans have a budget. This means that 64% of people do not know how much they are spending each month, making it challenging to achieve their financial goals.
In this blog post, we will explore why creating a budget that works for you is essential in skilled trades, how to create a budget, and some tips to help you stay on track.
Why Is Creating a Budget Important for Skilled Trades?
As a skilled tradesperson, you may have a stable income, but this doesn’t necessarily mean you know how to budget. However, budgeting is as essential for skilled tradespeople as it is for anyone else. Here are some reasons why:
1. It Helps You Manage Your Income and Expenses
Creating a budget allows you to track your income and expenses. You can identify how much money you are earning and where it is going. By doing this, you can make informed decisions about how to allocate your money and avoid overspending.
2. It Helps You Achieve Your Financial Goals
Budgeting helps you prioritize your goals and allocate money accordingly. It can help you achieve short-term goals, such as paying off debt, as well as long-term goals, such as saving for retirement. By sticking to a budget, you can monitor progress towards your goals and make any necessary adjustments.
3. It Helps You Prepare for Unexpected Expenses
As a skilled tradesperson, you may experience unexpected expenses, such as tools breaking or vehicles malfunctioning. Budgeting helps you prepare for these expenses by setting aside money for emergencies.
Creating a Budget That Works for You
Creating a budget might seem daunting at first, but with the right strategy, it can be a relatively simple process. Here are some steps to follow when creating a budget that works for you:
Step 1: Determine Your Monthly Income
The first step in creating a budget is to determine your monthly income. This should include any regular income you receive, such as your hourly rate or monthly salary. If you receive irregular income, such as commission or overtime, try to estimate your average monthly income.
Step 2: List Your Monthly Expenses
The next step is to list your monthly expenses. Start with fixed expenses, such as rent/mortgage payments, car payments, and utilities. Then, move on to variable expenses, such as groceries, entertainment, and clothing. Be sure to include all expenses and try to be as accurate as possible.
Step 3: Categorize Your Expenses
Once you have listed your expenses, categorize them into essential and non-essential expenses. Essential expenses are those that you must pay, such as rent or mortgage payments, utilities, and car payments. Non-essential expenses are those that you can cut back on, such as dining out, entertainment, and shopping.
Step 4: Create a Budget
With a clear picture of your income and expenses, you can create a budget that works for you. Start by allocating your income towards essentials, such as rent/mortgage payments and bills. Then, allocate money towards goals, such as paying off debt or saving for retirement. Finally, allocate money towards non-essential expenses, such as entertainment and shopping.
Tips to Help You Stick to Your Budget
Creating a budget is only the first step; sticking to it can be challenging. Here are some tips to help you stay on track:
1. Track Your Spending
Keeping track of your spending helps you identify areas where you may be overspending. Use a budgeting app, spreadsheet, or paper to keep track of each transaction. This will help you stay on top of where your money is going and identify any areas where you can cut back.
2. Stick to Cash
Using cash instead of credit cards or debit cards can help you stay on budget. When you use cash, you can physically see how much money you have left, which can prevent overspending.
3. Automate Your Savings
Automating your savings can help you stay consistent with your savings goals. Set up an automatic transfer to move money from your checking account to your savings account each month. This can help you save money without even thinking about it.
Budgeting is an essential tool that can help skilled tradespeople manage their income and expenses, achieve their financial goals, and prepare for unexpected expenses. By following the steps outlined in this blog post and using the tips to stay on track, you can create a budget that works for you and take control of your financial future.
> 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.
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