By Maryalene LaPonsie
Money Talks News, moneytalksnews.com
Regardless of whether you want to save more, spend less, or finally take that trip to Tahiti, a budget can get you there.
Step 1: Set Your Goals
The first step in the budget process is simple. Ask yourself: What do you want your money to do for you? Here are some ideas to get the wheels turning.
• Do you want it to buy you a vacation?
• Do you want it to buy you a house?
• Do you want it as a security blanket in the bank?
• Or would you merely be happy if it would pay the bills each month with a little left over?
Budgeting can help with each and every one of these goals. In addition, by having a concrete goal, you increase your chances of sticking to your budget. Some people even create dream or vision boards with photos representing their goal to motivate themselves.
Step 2: Track Your Expenses
Next, you need to get a handle on where you are already spending your money. This step is important for two reasons.
1. It can help identify leaks in your budget, such as the $100/month you’re spending on fast-food breakfasts.
2. It can help you make a realistic budget. If you are currently spending $800/month on groceries, budgeting for $500 is probably setting yourself up for failure.
The old-fashioned way to track expenses is to collect your receipts and keep a log of every penny you spend for the next month. However, you can make the process much simpler by signing up for an online money management tool like PowerWallet or Mint. These services track your expenses automatically and neatly categorize them for you. Best of all, most of them don’t cost you a dime.
Step 3: Write It Down
Now that you’ve tracked your expenses, you can use those amounts as a guide to create a written budget. Whether you use an online tool, Excel spreadsheet, or a notebook and pen is up to you, but you want to have your budget recorded in a location where it can be easily accessed and changed as needed.
My personal advice is to always estimate your income low and your expenses high. It’s better to reach the end of the month and find you have extra money in the bank than to come up short.
In addition, make sure you put a name to every dollar. Maybe you finish with the monthly bills and have $200 left over. Don’t leave that as a catch-all slush fund; decide what you’re going to do with it. Maybe $100 will go into a savings account, $50 will be an extra debt payment, and $50 will be mad money.
Step 4: Monitor your progress
Once you have it written down, don’t ignore your budget. Make a point to compare your actual expenses with your budget on a regular basis, such as each payday.
If you’re using PowerWallet or Mint, it’ll be easy to quickly see how much you’ve spent so far in each category for the month. Then, you can make adjustments as necessary. For example, if you’re budgeting $50 for clothing and have spent $75, you’ll need to not only stop buying clothes, but also make an adjustment elsewhere in your budget to make up for the extra $25.
On the flip side, maybe it’s the last week of the month, and you haven’t spent a dime of your entertainment budget. In that case, it’s time to make a date and go have some fun!
Step 5: Get a Coach
Maybe you’re feeling overwhelmed. A budgeting coach can help. But never deal with any credit counseling organization without checking the Better Business Bureau and your state’s attorney general’s office for consumer complaints, as well as online complaint sites.
As an alternative, you can ask a money-savvy friend for help. In either case, having someone walk with you step-by-step through the budgeting process can help make more sense of how to create a realistic spending plan for your money.
Step 6: Stay Flexible
Finally, your budget is a living document. Unlike your rotisserie oven, you shouldn’t set it and forget it. You should be regularly evaluating it and making changes as necessary. Always blowing through the food budget? You may need to increase that and consider where else you can cut back. In addition, as your income or expenses change or as you meet goals and identify new ones, adjust your budget to reflect your new circumstances.
Ultimately, your budget is not about restricting your money; it’s about empowering it. A good budget finally puts you in control of your dollars and allows you to dictate where your money is going rather than letting your bank account get nickel-and-dimed by what may amount to silly, incidental purchases