The idea of creating a budget doesn’t hold much appeal for most people. If you are doing well and making your bills every month you may not feel that you need to actually sit down and create a budget.
However, the truth is that everyone can benefit from a budget no matter how much or how little money you may have. Not only can budgeting help relieve financial pressure for some people but, it can also help prevent arguments over money and spending for couples and families.
Things You Should Know About Budget Planning
Taking the time to create a budget can actually make your life easier in a variety of ways. Here are some things you should know about budget planning.
- Budget planning is not just for those who are having difficulty paying their bills. It has benefits for everyone single or married, rich or poor.
- Budget planning can not only keep your spending on track but can keep your savings on track as well.
- Budget Planning can uncover cash flow problems that you may not even be aware of resulting in even more savings that can be used for that special vacation, your children’s college education or your retirement.
- Budgets need to be reviewed monthly and adjusted when needed.
- Making a budget isn’t difficult it simply takes a little time and thought. Sticking to the budget you make is the difficult part of budgeting.
How To Budget
The first step in budgeting is to know what your income and expenses are. So, before actually sitting down to create a budget you should gather all your financial statements, record all the income you make and list all your expenses.
When listing expenses you may need to keep a record of all that incidental spending you do. Carry a notebook and pen and write down those cups of coffee you buy on the way to work, those lottery tickets you purchase on paydays and all other spending that may not have a receipt.
Once you have all your financial information gathered then it is time to sit down and actually begin to set up your budget. The first thing you need to do is to make a list of all your fixed expenses. These are expenses that remain the same every month such as rent or house payments, utilities, phone and such. Then make a list of your variable expenses such as groceries, gas and other expenses you have on a monthly basis but may vary from month to month.
Once you have your fixed and variable expenses listed then total them. Keep in mind that the total on your variable expenses will be recorded something like this $100.00 to $135.00 rather than a set number. Now take a look at your expense list and decide where you can cut out some expenses. For example you can cut $20.00 a month in groceries by using coupons or shopping for more sales. Can you save money by watching movies at home as opposed to going to the theater? Start making the simple and less painful cuts first.
Once you have a list of set expenses you think you can work with then the next thing to do is to subtract your expenses from your income. Make sure that includes an amount to save each month as an expense and that way you will ensure that you are saving something each month even if it is only ten or twenty dollars.
Check and see if your budget is workable. If not then go back into your expenses and see if some of them can be lowered. Even two or three dollars here and there can add up.
Budgeting Process
Once you have your monthly budget worked out then you need to divide your budget into segments based on the number of pay periods you have each month. If you get paid weekly, divide your expenses by four, twice a month by two.
This is so you know exactly what you need to take out of each paycheck each pay period in order to make all your expenses. Make sure that you take all those expenses necessary out each time you get paid to ensure that you don’t end up short at the end of the month.
Tools That Can Help With Budgeting
There are various tools that can help you keep track of your budget. Here are a few that can prove helpful.
- A ledger. This is for people who want to keep a hard copy of their budget including income and spending.
- Free online budgeting tools. There are a lot of free online budgeting tools from online ledgers, to free advice, to actual sites where you can combine all your financial records.
- A budget consultant. If you are having trouble actually making your budget then a budget consultant may help you to get your budget straight and stay on course.
Now that you know the basics of budgeting you are ready to get started. Budgeting can lead you to more financial success.
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