Have you been running from the idea of a budget? Have you tried hundreds of times to get a grip on your finances only to say it’s impossible? Budgeting can help you discover where you stand financially and can also decrease anxiety and stress.
Make a spending record. Be honest with yourself and include everything from your rent/mortgage to the $20 you owe mom. This can be done in a composition book, spiral notebook or word document like excel worksheet.
Choose your budget method. There are several budgeting methods out there from the envelope method, spreadsheets or financial software. Whichever method you choose, make sure it is simple and something you can do and modify with minimal effort. Compile your budget in advance for the upcoming month and avoid making your budget mid-month. Simply list your income at the top and begin to deduct your expenses under your income. This should yield a surplus or a shortage. You must budget every penny of your money monthly, and, if you have a surplus, place it in a short term savings for incidentals. If you have a shortage of funds, evaluate your personal expenses, ie.. cell phone, cable, clothing, entertainment etc. and make adjustments as necessary.
Stick to it! After you have written down all of your expenses and your current income, it’s time to get busy. If you have a surplus, great. You can move on to the next step. If you still have a shortage, continue to work on step 2 until you are either breaking even or you have a surplus. Your budget is not a prison, it is not intended to confine you but to liberate you and give you control. Change your mind about budgeting and about money. If you fall out of the buggy, dust yourself off and pick up where you left off.
Goal Setting. Now that you have kept your budget for 2 months, it is now time to start the goal-setting process. If you want to make a purchase outside of your budget, begin to evaluate your expenses and decrease where you can and then allocate that money towards specific goals. Continue to modify your goals monthly, quarterly and yearly to help you to reach your mark.
If you are living above your means your first goal is to live below your means (income) and generate a surplus. Which will in time become your emergency fund and your investment fund.