On the face of it, making a budget seems easy—after all, the core of it is simple hard numbers. But, the reality plays out much differently and the root of many people’s financial woes is not having a solid budget when they really should. With a little planning and commitment to change, you can get your money situation under control.
Think of it as a “Spending Plan’’
The word ‘’budget’’ has a lot of negative connotations; it can make you think of restrictions, drastic changes to your lifestyle, not having any fun and obsessing over every dollar you spend. Now, if you have been gravely irresponsible with your money, this may be an accurate assessment of what the word means to you; but for most of us, it just means developing a smart plan to spend and save your money. You will still be able to give yourself some treats that you work into your budget. Do not be afraid to take a good hard look at your finances and develop a strategy for taking control of your money.
Get Specific about Your Goals
When we are clear about our goals, it is much easier to develop and stick to a plan that will help us achieve them. If you are thinking about making a budget, there is probably something prompting it—maybe you want to increase your savings, have a specific item in mind you want to purchase, or get out of debt. Think of what you want to accomplish in being more responsible with your money. If you have a definite purpose in mind, you will be much more motivated to create and stick to a budget that works for you. Having a strong ‘’why’’ is important in achieving any goal. If the only reason you are creating a budget is because you think you should or because some personal finance book recommended it as a way to achieve financial success, you will likely falter sooner than later.
Gather Some Hard Data
If you are going to create a real budget, you need to gather some hard facts and figures that show exactly how much money you are taking home each paycheck and where this money is going. First, you need to start with fixed monthly expenses that do not fluctuate, such as your rent or cable bill. Then you need to factor in other regular expenses, such as gas and grocery bills, as well as irregular bills, such as property tax or car insurance. To get an accurate assessment of expenses that fluctuate month to month, as well as uncovering your discretionary spending habits, you should keep a spending journal for a month to see where your money is going and how much of it. You will likely find some areas where you can spend a bit less. This hard data will lay a strong foundation for your budget and help you plan how to reach your larger financial goals, whether it is to put a certain amount of money away in savings or pay down your credit card debt.
About the Author: Kelli Cooper is a freelance writer who enjoys sharing tips on personal finance; in writing pieces, she often turns to a variety of financial experts, such as John Studzinski, for crucial pieces of information.
