Money is something that everyone worries about at some point in their life – and learning to create a budget is one of the most efficient ways you can manage your money. Everyone is capable of building a budget and making a few simple changes that will affect their financial future. Regardless, if you feel that your finances are under control or not, a budget will make sure that you are using your money the way you want to. Taking a little extra time to create a budget that works for your lifestyle will give you an idea on where your money is going and take you one step closer to financial freedom.
The idea of setting up a budget can be overwhelming but we can simplify it by breaking the task down into a few easy steps. Before you can really accomplish setting up a budget you will need to: track all your expenditures, classify your expenses, pick out a budget worksheet, and decide on a goal for your budget. Creating a budget will lay out a road map for your finances – the more time you spend setting up your budget the less you will be spending worrying about your financial future. So let’s get started! Tracking all your expenditures is the first step in creating a successful budget; you can choose to do this anyway that works for you.
Many people choose to collect hard copies of receipts while other tech-savvy folks keep a record on their smartphone. Whatever works for you – just do it! Start by collecting all your receipts or tracking your spending over a 2 week long period. Every receipt for every transaction should be kept for one week– even the $1. 00 cup of coffee. By tracking each of your expenditures you can identify how you are really spending your money. At the same time, begin to classify your expenses by dividing them into categories. Start with bigger categories or expenses that are considered essentials.
Essentials are expenses or bills that you must pay like mortgage or rent, utility bills, groceries, car payments, etc. Then, start breaking it down from there into smaller categories these are our non-essentials like new furniture, pizza delivery, concerts, movies, etc. While completing these processes of identifying your spending habits and your expenses you will already be one step closer to being in control of your money and spending habits. Next, find yourself a budget worksheet online. This is the easiest way to go about tracking your income and expenditures, and any other miscellaneous expenses that you want to include.
Another easy way to set your budget up for success is to find a budget app for your smartphone – this way you will always have it at your fingertips. Try to focus on specific categories that you want to pay attention to, like ATM withdrawals or spending too much on entertainment or eating out. Otherwise you may end up driving yourself crazy with the details of the budget worksheet. Now, get all of your information in one place and start plugging in numbers to your budget worksheet. Start by listing your monthly income, and then subtract the essential expenses from your total monthly income.
If you have money left over subtract the “extras” or non-essentials expenses that you would like to have. If you don’t have any money left over start looking into things that are wants and not needs to see where you can cut back. Go through each item and see what prices can be negotiated like your cell phone bill or internet plan. After all that, if you still have money left over – awesome! If you included credit card debt or any other revolving debt into your monthly expenses you should use that left over money to pay down those debts before stashing it away in a savings account that accrues less that 1% interest every month.
The final step is to set a goal for yourself and your budget. What do you hope to achieve by creating this budget, maybe to save for retirement or something more fun like a Hawaiian vacation? Once you have decided on a goal, limit your spending and aim to save 10% of your income every month to help you reach that goal. By setting a goal you are one step closer to achieving more financial freedom and the ability to be worry free and ultra-efficient in the way your manage your money. Now that you have your budget set up you will be able to track your money uch more efficiently.
Setting up the budget took a little bit of work initially but the more that you use it you’ll see how easy it can be to account for your spending habits. The work will have all paid off once you reach the financial goal you have set for yourself or once you find yourself out of debt. The work doesn’t stop here though – continue to stay organized with you finances and you will be amazed at the control you can have with your finances. Nothing is more invigorating than having financial freedom and a stress free financial life.