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Creating A Workable Budget
When most people hear the word 'budget' the heart palpations start. You may feat that sticking to a budget means that you won't have extra money to do what you want or buy the things that you want, but in fact, the opposite is true. Creating and sticking to a budget can help you save more money for the future and pay off debt while still preserving your lifestyle. A budget is especially important for those who live from paycheck to paycheck or who sometimes have difficulties making ends meet. If you follow the steps below, you'll be pleasantly surprised at how easy it is to create and stick to a monthly budget.
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Set Goals.
The first thing to do is to set some long-term and short-term goals. These can be anything from saving a month to saving 6 months worth of living expenses to paying off your house to paying off credit cards. If you don't have a clear picture of where you want your finances to go, how will you ever reach the destination? Your long-term and short-term goals will become your overall financial roadmap.
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Track Your Spending.
If you're like most people, you don't currently have a clear picture of where all of your money is going. Start by tracking your spending (down to every penny) over a 3-month period. Save your receipts, bills, and cancelled checks. If you spend cash, keep a notepad where you write down each amount and what it was for.
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Determine Your Budget.
Now that you have a good overview of your spending habits, it's time to sit down and determine your budgeting needs. As you go through your spending records from the last couple of months, spot those excess spending areas and other problem areas. You should be able to spot areas in which you can shift money to savings or debt payoffs.
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Create Your Budget.
Now it's time to create your actual budget and direct your spending into ways that will help you reach your short-term and long-term financial goals. Start by cutting those areas in which you recognize excess spending. Work on modifying your problem areas and shifting more money to savings or debt payoffs. Be sure to leave money (within reason!) for the fun stuff though.
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Measure Your Progress.
As you implement your budget, be sure to track your progress along the way. Continue to keep records and track your spending. Every three months, do a complete review to see how you're doing. Are you paying off debt? Are you increasing your savings? If you fall off the wagon at any point, forgive yourself and get back on. Also, during your reassessment, if you need to make any changes to your financial goals, this is the time to do it.
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Rewards Yourself.
Budgeting can be challenging, so it's important to reward your efforts along the way! Create a fun reward system that matches your short-term and long-term goals. As you meet each goal, reward yourself in some way: go out to dinner, to the movies, buy that book you've been wanting, etc.
Disclaimer: This site and its services are for informational purposes only and are not a substitute for professional advice, examination, diagnosis or treatment. See full disclaimer.
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