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Creating a budget doesn’t have to be difficult. In fact, it’s quite simple to write down what you plan to spend on paper. The tricky part is sticking to that budget once it is set. If you want to create an effective budget, follow these easy steps.
Step 1: Track Your Spending
Every time you make a purchase for the next month, write it down in a journal. Track every penny you spend whether it’s for groceries or for your electric bill. When you see exactly where your money is going, it will be much easier for you to realize your spending habits and do something to make them better for your budget.
Step 2: Find Your Financial Statements
This step will help you track your expenses. You will be able to see a pattern in your utility bill and see where you are using your credit card. Make sure you don’t list anything twice, but make sure everything necessary is included in your journal.
Step 3: List Your Sources of Income
You should know about how much money you get each month for your household income. If the amount of income you get each month varies, look at the past few months and estimate an amount to use for your budget. However, you should make sure you are saving enough money to cover your expenses during those months when you don’t make as much as you had expected.
Step 4: Break Up Your Expenses
Your expenses can be broken up into two categories: fixed and variable. Your fixed expenses are those that don’t change from month to month, like your rent or mortgage payment. Your variable expenses are those that do change, like utilities and the amount of money you use for groceries.
Step 5: Total Income and Expenses and Evaluate
At this point, you should know about how much money you have to spend every month and you should be able to see about how much you have been spending. At this point, it is time to take a look at your expenses and see where you can save some money. You may need to cut out your cable or Netflix for a while, or find a way to save on groceries. Maybe you’ve been spending way too much money on clothing or other items that aren’t entirely necessary.
Step 6: Find a Way to Save
One thing you should also do with your budget is make a commitment to save a specific amount of money every month. Whether that money goes into a college fund for your children, a retirement fund for you, or into an emergency fund for unexpected expenses, you will be very glad you saved later. Treat this savings amount like any other fixed expense, and budget the money you have left.
Step 7: Live by This Plan
This is much easier said than done. What may help is if you continue to track your expenses in your journal. That way, you will know how much you have spent and how much you have left in the month for any given purchase.
Step 8: Continue to Evaluate and Readjust Your Budget Every Month
You can’t just assume that the first budget you create is going to work best for you and your family. You should continue to look at your budget every month and adjust anything that isn’t working. Making a budget is a process, but in the end you will save a lot more money than you would without one.
Guest Post: Elise Brown is an author who writes guest posts on the topics of business, marketing, credit cards, and personal finance. Additionally, she works for a website that focuses on educating readers about payday cash loans.