With each New Year people make resolutions to do better. One common theme is bettering your personal budget – or even just setting one. Well, if you’re behind in this one, then why not start your spring cleaning early and clean up your budget!
Start with Tracking for a Month
It’s almost spring and you still haven’t followed your New Year’s wish to get into better shape financially. It’s not that you don’t want to, but that you really aren’t sure where to start. It’s kind of like spring cleaning – the job is overwhelming, so you avoid it altogether. And that only makes things worse. It’s not easy to realize that you have to be on a budget in order to survive. Yet, even the wealthiest people tend to follow budgets not just in business, but also in their personal lives. This tool helps people to maintain their finances and to actually increase their net worth.
Starting Your Budget Plan
To begin with you need to really understand your expenses and income. The income part is usually easy – just look at your pay stubs and see how much you made, net of taxes and deductions, of course. It’s the expenses that are challenging.
To start with you will have to track your expenses for at least a month. And this means every thing! Keep a little log, a notebook, or whatever you find easiest, and tally each time you spend something. And this means everything! If you don’t, then you will miss something and wonder why you can’t keep within your budget. This tracking shows you where you spend your money, and ways that you can then decide what the real amounts that you want to (or can) spend in each area of your expenses.
Learn to categorize your expenses. These are headings such as rent, auto, entertainment, clothes, and so forth. Each person has different ways of deciding what fits where for some things. Some people may decide that dining out is its own category, whereas others just lump it in with entertainment. You decide. And don’t forget things like kids’ expenses, if you have them, and allowances for pet expenses, if you have them, too.
Following Through with Your Budget Plan
Once you have all of your regular expenses and income categorized and listed, then make sure to brainstorm to find your unusual expenses. These can include things like an annual insurance payment, your driver’s license renewal, and a myriad of other things.
Make yourself a spreadsheet, or download this one, and use it to track your expenses and income. This is the simplest form, and is at least a good start! From there you can move forward and refine your budget and start to save, once you get things under control. Make sure to review and follow up on everything!
At least once a month go through your entire list of expenses and make sure that you have included everything. Anything that is missed is a flag that you are not paying attention to your finances. And that is what can lead you into trouble. It’s okay to have a reserve of uncategorized expenses – usually entertainment, food, and such – that you simply list by itself. But make sure that you actually stay within that budget and don’t rob from one group to pay for another. And always pay yourself first!
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