Are you tired of wasting money on things you can’t even place your finger on? Have you tried saving money for the things you want such as a new car or a family vacation, unsuccessfully?
Then, you should learn how to budget your money. Managing your money with budgeting will help you become financially successful.
What is a Budget?
Budgeting is the process of creating a plan on how to spend your money. It enables you to have enough money for everything you would like to do, by reorganizing your finances, prioritizing your spending, and dealing with your debt.
Budgeting can be a daunting task, especially for beginners, because it is easy and tempting to spend money on non-essentials. However, it is the cornerstone of a sound financial plan and will help you get ahead financially.
How to Begin Budgeting Your Money
Budgeting is about understanding how money works and does not have to be scary. The steps below will help you develop a reasonable budget that covers your necessities and help you meet your financial goals.
Outline your Income and Expenses
To begin budgeting your money, first, you have to learn how much income you get, and how much you spend on expenses monthly.
Gather every financial statement such as bank statements, and utility bills, and create a list of all your monthly income and expenses.
Record all sources of income including: wages, rental income, child support, and any other consistent source of income.
Your monthly expenses should include items you have to pay for such as rent, mortgage, electricity, water, groceries, etc., as well as non-essential extra expenses such as cable TV, new shoes, lunch dates, etc.
This list will help you easily spot the things you’re spending the bulk of your money and how much you are spending on things that you don’t really need, thereby enabling you to make changes that would allow more money to go into your savings.
Pay Check: $3,456
Child Support: $234
Part-Time Job: $345 (Check out great part-time job ideas)
Car Insurance: $29.00
Cell Phone: $60
Here is great software to help you create your budget:
- Mint: Money Manager
- Your Online Banking – Online banking normally has budgeting software built-in. This allows you to create budgets quickly and easily.
Plan Your Budget
After you have outlined your income and expenses, the next step is to plan your budget. When planning your budget, aim to spend less than you earn by dedicating your income primarily to your necessities. To prepare your budget, create a functional spreadsheet, with an income and expense column, detailing how you intend to spend your money
Adjust your monthly expense to match your income by focusing more on your needs and less on your wants or splurges. However, you should also ensure your budget is reasonable by allowing a moderate amount to spend on other things such as emergencies.
If your expenses are higher than your income, look at your non-essential expenses to totally cut down your spending on unnecessary items.
Planning your budget enables you to find unnecessary expense areas to cut, in order to have more money to meet your saving goals. Having more money you help you work toward making your dreams a reality.
Stick To Your Budget
Planning your budget is quite an easy task, but sticking to it is easier said than done, and requires sheer will and determination. However, there are some methods you can apply to stick to your budget.
You can set up your checking account to automatically transfer a set amount from your income into your saving account monthly. You can also set a savings goal, such as saving for a car or a holiday, to motivate you to stick to your budget.
Now that you have learned how to budget your money, it is also important to review your budget monthly to ensure that you on track.
At the end of the month, put together a list of your actual expenses and compare it with your budget to see how well you performed and the areas where you need improvement.