Having a budget is one of the best things you can do for yourself and your financial future. If you don’t know where to start, simply follow the first three steps below and start enjoying a life free from financial stress and complications.
1. Write It Down
Many financial experts will tell you to track your spending for a month before you start budgeting. However, if you know you need to budget to get financial security, the time to start is now. Starting a budget is the easiest if you use credit cards and debit cards, because you can pull up your records from the past month and write down everything you spent. If you have an ATM withdrawal on your statement, write that down too. Break it into categories. The easiest categories are “Rent/Mortgage” “Groceries” “Eating Out” “Insurance Payments” “Medical Expenses” “Debt Payments” “Clothing” “Cell Phone,” and “Miscellaneous.” Use a pen and paper or even better, open up an excel spread sheet and put down as much information as you have from the last month. If you use cash and don’t keep receipts, this system might be more challenging, but you can at least know how much money you started with when you got paid and look at your wallet and see how much is left. Essentially, once you know where you stand, you will know how much you need to cut back on your spending every month.
2. Make It A Habit
Maintaining a budget is a habit. It’s no different from brushing your teeth or trying to jog a few times a week. It’s something that you need to do at least once a week to start out with and eventually you can move to once a month. Essentially, all you really need to do is write down what you spend every week and plug it into your budget. This can be the excel sheet that you started or you can use an online product like Mint.com. Updating your budget sheet keeps you aware. The reason most people overspend is because they think they have a certain amount of money when they really don’t. Watching your budget and updating your budget keeps you in the loop as far as your finances go. If you spend money on a big dinner out one week, you’ll be aware enough to try to bring your lunch to work the next. This is what it means to “stick to a budget.”
3. Share Your Plan
Just like anything new that you are starting to do, it helps to have accountability. Tell your parents you are trying to budget. Tell your friends. If you are married, have your spouse join in with you. If the people who are closest to you know you are starting something new, they can ask you about it and keep you accountable. They can also remind you to plug in your numbers at the end of every week.
Essentially, these are the first three steps to starting a budget. The next steps are really quite simple. Just repeat 1-3 over and over again until you iron out your budget and it becomes a habit. I promise that eventually budgeting can be fun, especially when you see how much money you save in the end!
Photo Credit: Flickr Creative Commons