Time to Create a Budget

At the end of the month, do you often find yourself with a lot less money than you expected?  Do you have a hard time determining exactly what you spent your money on? Do you feel that you should have more to show for your hard work than you currently do? Are you and your spouse or partner always fighting about money?

If any of these are true, you may want to consider creating a budget.

The first step in creating a budget is to determine why you want to create a budget.  Though it sounds counterintuitive, knowing why you want to create a budget, and then creating that budget with that specific goal in mind will increase the likelihood that you’ll actually adhere to it. After all, there’s no sense in creating a budget if you don’t follow it.

If you’re tired of wondering where your money went, or living paycheck to paycheck, a budget can help.  Here are a few things you need to do to create a budget that will work for you.

• Find out what you actually spend each month. While it’s easy to remember monthly bills and even how much you’ve spent on groceries and gas, those are likely not the budget busters.  Instead, sit down with your last few bank statements, and analyze every charge on there. You’ll likely be shocked by how much you spend on things like morning coffee, lunch or dinner out, and other splurges.

• Create a spreadsheet or use an app to track all income and expenses going forward.  Once you’ve determined exactly how much you’ve spent in the last couple of months, you’ll want to have a tool to continue to track both money coming in and money spent. Take a few moments and create a spreadsheet that you can update weekly with all banking and credit card activity. Some may prefer to use an app, and there are several, that work with your laptop, desktop, smartphone, or tablet.

• When preparing your budget, make sure to include one-time, once a quarter, or yearly expenses such as holiday spending, birthday and anniversary presents, property taxes, insurance premiums, and association/professional dues.  Be sure to account for these expenses in the month that they will be paid in order to have a more accurate picture of actual cash flow.

• Set a budget goal.  Do you want to save enough for your dream vacation or a down payment on your dream house?  Are you saving for tuition expenses for your children? Are your goals more long-term, such as saving for retirement?  Having a goal, or several goals, will help with budget preparation and the incentive to stick to it when tempted to overspend.

• Don’t guilt yourself if you cheat.  Like being on a diet, those who are budgeting can derail their entire plan by splurging for an expensive lunch or dinner or a night out with friends.  Don’t abandon your budget because you slipped. Just go right back on the next day.

It’s your choice if you want to make your budget restrictive or leave a little wiggle room.  Either way, knowing exactly where your money is going goes a long way towards making sure that it’s going where you want it to go.

Resources

1. https://www.fool.com/investing

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