By James Johnson
Budgeting for many seems like a hard and tedious task.
Many tend to rationalize that they don’t have enough money coming in to budget it, and besides, it all ends up going to bills less a few dollars here and there. The reality, however, is that budgeting your money is just plain financially intelligent- regardless of how much money you earn. You should budget your money even if your on unemployment!
Why do you budget? Because more often than not, the reason we don’t think we have money or that we feel broke all the time, is that we’re not fully aware of how much money we’re actually spending. If you make 3,000 dollars a month, your bills are around 2,000 dollars, and you can’t find two nickels to rub together, chances are your incrementally and irresponsibly spending 1,000 dollars every month on little stuff and don’t realize it.
Learning how to budget your money will save you money and give you more control over your spending habits.
In fact, many don’t realize, until they budget their money, that they even have the spending habits they do! It’s a real eye opener.
Budgeting is not hard, in fact after you get used to doing these simple steps below- budgeting will not only be easy, it will change your life and give you amazing insight into how to improve your life without having to earn more money like you may think you do.
Step 1:
Write Down Everything
You should have a log for all your money in and money expenditures. If you get a check from work, enter in your log. If you do some freelance work online and get paid for it via PayPal, write that down. Make sure your money in and money out are separate from the logging of your paychecks/income because if you put them together you may deduct money you pull out of an atm, then you may deduct it again when you itemize where the money was spent. This will make your budge lopsided.
Step 2:
Itemize
Itemize to raise awareness of where you can tweak your budget or do things differently to save money and put it towards more things you need.
You should itemize your receipts, write down what you buy, where you buy it, the date you purchased it and keep a running tally of how much you have vs how much you’ve spent.
This is much more simple than it sounds. This helps you to figure out where your habits are. Where your spending money, and it keeps you aware of all the times you spend money- even after you’re no longer in the zone. We tend to not think about that daily energy drink, coffee, or subway sandwich. When it comes to things we need, we don’t realize that the reason we don’t have the money for it is that we bought 30 cans of energy drink.
By realizing this and not wanting to give up your energy fix, you can make other arrangements such as going to the dollar tree and purchasing ingredients to make a bulk batch of energy drink supplements where by you can make the 3.00 from one day stretch for a week, dramatically saving money. You may also be going to Starbucks for a premium cup of coffee at 6.00 average per day. You can get an equally delicious and energizing coffee at 7-11 for 1.50 saving even more money.
Step 3:
Formulate A Monthly Budget Plan
After a few months you can take the information in steps one and two and deduct the expenses from the income and figure out what your fixed and variable expenses are. Fixed are those that don’t change like rent, car payment, and food. Variable are things that can change like laundry detergent, clothes, and other non essentials (for every month). Once you figure out what your spending a month you can create a monthly budget.
Step 4:
Savings
Create a savings account and start to figure out where you can tweak your budge (i.e. like the aforementioned coffee/energy drink ideas) to save money. Don’t spend that extra savings other than paying bills. If everything is paid and you have some surplus money- put it into your savings account and budget an expense of paying yourself (list this as an expense and income but in the variable section). To truly be free and to make better decisions, having some money around helps. Your savings can be used to supplement your habitual spending you don’t want to give up. By using savings and not your budget you create some boundaries of what’s available and by using your card to extract money (only at the stores) you log what your buying.
Having a cushion gives you peace of mind and the ability to think without stressing out. As you run out of money you tend to get stressed and feel less excited about what you’re capable of doing. By having a cushion you develop peace of mind and make decisions based on what’s good for you- not retail therapy or trying to buy your way out of stress.
Do you need to budget your finances better? Quite a few folks fight to budget effectively and it’s easy to see why. In case you need to learn how to create a budget that you can stick to, try the envelope method at http://hubpages.com/hub/Envelope-Secret-to-Making-and-Sticking-to-a-Budget many debt reductions specialists endorse. When finding out how to budget money, many overlook this easy tool. Often men and women use a method that has them list their debts by interest rate. But with using the debt snowball at http://hubpages.com/hub/Simple-Tips-On-Dealing-With-Your-Own-Debt you completely disregard interest rates and just list your debts moving from smallest to largest. Pay the minimum on all debts except for the smallest. Use the money you were using to pay the smallest debt and start adding it to the payment of the second smallest debt.
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