Achieving your goals with your money is the fun side of saving. Setting up a budget on the other hand is everything else than fun. It is still necessarily to succeed.
Often budgeting reflects a bad image because of the way we look at it. If you associate budgeting with the penny counting sacrifices chances are you are trying hard to avoid it. If however you see budgeting as something helping you to achieve your short or long term goals you are more likely to succeed and stick to it. Budgeting is like a diet or starting to eat healthy. The first is negative and restrictive while the latter is positive allowing you to indulge now and again and still achieve your goals. Budgeting is just a tool to show where your money goes and helps you to create a spending plan. Budgeting helps you to save for those things which are important to you. It is hard to make conscious decisions about spending your money otherwise.
In order to save money creating a budget is the key to success. It is nothing more than a statement of all your income and the expected expenses.
It will consume some time in the first place to create a budget but with time and practise it will become your second nature. Your efforts will pay off in the long-term. Don’t trap into the fall by generising your budget but try to adjust it to your actual needs and lifestyle.
Here are a few simple ways on how to get started and some other useful information
1. Gather all your personal financial information you can including bank statements, investment accounts, recent utility bills and any other information regarding your income or expenses.
2. Now with the information on hand you should be able to record all your income sources. Don’t forget to include any outside incomes such as a side business.
3. With the information you gathered beforehand you can create a list of your monthly expenses. include anything else you might think of during the process and don’t forget to add items you remember the following day.
Break this list into two categories: fixed and variable. The fixed expenses are those which are most likely to stay each months, while variable expenses will change each month.
Fixed variables include: mortgagee, payment, rent, car payments, auto insurance, utilities, cable and/or internet service, trash pickup, credit card payments.
Variable expenses will include groceries, eating out, clothing, entertainment, dry cleaning, retirement, gasoline, gifts, any college savings. The most important item of this category is savings. In fact if you can afford it you could move it to the fixed expenses.
4.
Adjustments - It’s great of course if you’re monthly income is higher than your actual expenses. It gives you more freedom and more possibility to save.
If however your expenses outrun your income you probably need to make some adjustments and cut back on variable expenses. Find effective ways to reduce certain costs to stay within your budget.
You should be able to make adjustments throughout the month. If something unexpected happens in particular month requiring paying money you could move it from one section to the other.
5.
Keep tracking your budget at all times for each category. You are less likely to overspend if you have an estimate of your spending. Record you’re spending every single day- it only takes a few minutes. Not only will it keep you on track you will save time by not leaving everything for the last day of the month.
6.
Make sure to review your budget monthly. Compare the income versus the spending. Look for areas where improves are needed. Don’t forget to praise yourself on areas you have done well!
7.
Keep changing your budget until your find the way which works best for you. Make regular changes to your budget according to your circumstances.
Some final tips:
-find categories which will fit your personal situation and spending habits.
-create enough categories to make sure you have the right picture of where your money goes
-review regular whether you need more or fewer categories
-review your expenses to determine where to lower cost
-write down spending as quickly as possible as you are likely to forget where your cash went, it is hard to stay on track- remember cash disappears quickly
-carry a small notebook with you to record all your spending- this is much easier to transfer to your budget plan
-what are your goals, budgeting is about to help you to achieve your goals such as buying a house, a car, or funding university
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