Do you want to start a budget but you don’t know where to get started? Every great financial plan starts with a sound budget. If you’re trying to pay off bills or save for a dream vacation, a budget is your first step toward making your financial goals a reality. If you don’t use a budget form of some sort, you may wonder where your money is going each month. Creating a budget will help you feel more in control of your finances and let you save money for your goals.
If you want to succeed, you need to set goals. Without goals, you lack focus and direction. Goal setting not only allows you to take control of your life’s direction; it also provides you a benchmark for determining whether you are actually succeeding. Setting goals gives you a figure to aim at. Zig Ziglar says it best “If you aim at nothing, you will hit it every time”. Short-term goals should take no longer than a year to achieve. Long-term goals, such as saving for retirement or your child’s education, may take years to reach. Remember, When you set goals it is important that they motivate you: this means making sure that they are important to you, and that there is value in achieving them.
Your first order of business is finding out exactly how much you’re spending each month. You can do this by reviewing your bank statements, this can help you see exactly where your money is going. While this includes your recurring living expenses, such as your rent or mortgage, car payment, and utilities, it also includes the more variable amounts you spend on haircuts, groceries, and clothes each month. When calculating your expenses, also factor in unexpected bills, such as unplanned car repairs. Those items may be included in your emergency fund.
Once you’ve figured out how much money you need to stay afloat financially each month, it’s time to determine your actual income. Besides your regular salary, get an average figure of additional income sources like side hustles, over-time at work, alimony, child support, interest, dividends, and rental income. And factor those figures in your budget. You will have a create a new budget each month before that month actually begins.
In order to determine realistic savings and debt payoff goals, you must find out if you have a budget shortfall or overage. Do this by subtracting your monthly expenses from your income. If you determine you’re making more money than you’re spending, congratulations. This amount can be earmarked for savings and to pay off debt. But if you determine you’re spending more than you’re making, it’s time to do some cutting so you have something to save and don’t go further into debt.
The best way to stay on top of your budget is to record all of your expenses and income on your budget form. It may be an extra step to write in what you spent but it will be worth it.
Another way to track your expense is by using the envelope method. This expense tracking method is set up a “pay cash in person” method. At the start of the month, you put cash in envelopes labeled with budget lines. Groceries, entertainment and eating out are three great examples. Take your “groceries” envelope with you when you head to the grocery store. When the envelope is empty, your spending stops. Your money is essentially tracking itself. The envelope method is a powerful way to track expenses because physically watching the money leave the envelope inspires a whole new level of responsibility. You can get started with the envelope system today by clicking here.
Make sure that it’s possible to achieve the goals you set. If you set a goal that you have no hope of achieving, you will only demoralize yourself and erode your confidence. You won’t be going to hell if you break your budget but try to right back on track as soon as possible.
Print this FREE monthly budget template to help your family get a better grasp on your finances. You will be able to easily track your income and expenses each month to see where you can cut back to increase your savings. It is much easier to see everything once it is written down.