Creating and managing a budget can feel overwhelming, but it’s not as difficult as you might think. In this tough economic time, invest the time needed to bring you and your budget onto solid ground in three easy steps.
Track It
Simply put, you can’t know how to structure your budget until you know where your money is going on a consistent basis. Start creating your budget by simply tracking what you spend. On your computer or in a notebook, make a chart with two simple columns, labeling the first column “date” and the second column “money spent.”
Take the next month and write down every single penny you spend onto this chart. A month might seem like a long time, but it will be worth the effort to see exactly where you’re money is going each month.
“Also, things like Starbucks trips should be listed, since 250 trips a year at $4 each equals $1,000! You don’t want this overlooked,” states Damon Winter, a financial advisor specializing in insurance in Portland, Oregon. “To make this work over a month’s time, put cash and debit receipts in an envelope to help keep track of each penny you spend.”
Once you have a healthy list or a full envelope of expenditures, you can go through it and put them into categories, which may include:
- Monthly Bills – mortgage or rent, utilities, garbage, cable, etc.
- Groceries
- Gas/Transportation
- Entertainment/Recreation
- Pet Supplies
- Auto or Home Repair
If you come across expenditures that don’t seem to fit into a category, see if any of them can be sorted into their own group or consider adding a “Miscellaneous” category.
Prioritize It
Once you have the list of expenditures and the categories in front of you, take some time to create a budget on your computer or on a piece of notebook paper. Create a simple chart with three sections, one for Budgeted Bills, the Date Due, and Actual Money Spent.
Prioritize your monthly bills first, which include housing, transportation, insurance and utilities. Add up the cost of those bills, subtracting the total from your monthly income. Using the rest of the money you have and your list of expenditures, sketch out how much you can spend each month for different categories – you may decide that eating at a restaurant twice a week is important to you, so put that into your budget.
Change It
Once you’ve figured out how your money is spent and where you want it to go per your budget, it’s important to manage whatever budget system you’ve set up. Track your expenditures every couple of days, and evaluate whether or not changes need to be made in your budget. It’s important to remember that our priorities adjust as our lives change, and budgets are no different. As you continue to track your budget and expenditures, maintaining your monthly budget and deciding on your financial priorities will become much easier.
Kelly Wilson is a freelance writer who is obsessed with saving money. For additional guidance regarding money management, contact the friendly staff at Majestic Eagle Agency, specialists in financial health and insurance in Portland, Oregon.
