Creating a budget that works for you
Budgeting is something most people hate to assume or simply don’t know how to carry out. If a good budget is in place and you stick to it, you’ll be more successful at keeping a home, a car, and your credit cards. Keeping with a budget is also a great way to monitor how much you spend every month and can make allowances for savings. Budgeting also helps you raise your credit score over time, hence empowering you to buy the kind of things you desire in life. Many among us just have no clue that credit score controls many aspects of your living. So keeping that number in good standing is very important.
Those who have worked in a particular sector, where they have had to balance the books, know very well how important it is to get as close to zero. That is the point of a budget – to account for all of your money and get your bills paid – and paid on time. It’s best if your take home is already distributed before you’ve even received your paycheck. It might be a little depressing for a while until you pay a few things off, but at least you will see progress.
I Don’t Know Where to Start!
You are not alone, most people don’t. But there are many things that work for different people. You just have to make the commitment to try, to work on it and never give up. Set some goals for your household – maybe something like reducing your grocery bills or power bills. Perhaps some long term goals are in there like buying your first home or paying your home off early. Just keep your head straight and go about it the right way. No cheating by not recording your spending or overspending in areas you shouldn’t. Buckle down and adjust accordingly if you set your budget too unrealistically.
One very popular method of budgeting is getting away from leaving your money in the bank. You should have an idea as in how much your paycheck should be. So have it divided up before payday. Label envelopes with the different bills and categories you would dedicate your money to:
Credit Card 1, 2, 3 etc
You get the idea. In these envelopes, you would put the money you need to pay the bills. Once the cash is gone, it is gone. No going to the bank for more. This will help you focus on living within a certain limit. In the beginning, it might be hard to not being able to use the debit card and buy whatever you want. But the longer you do it, you’ll get used to it. This works very well to make people more aware as in where they are spending and where they need to cut down. If you run out of money right away, you are probably spending too much.
Couple these technique with an average amount that you feel you should spend on each thing and then use the envelopes to place the exact amount of cash aside to pay the bill. You might overestimate a bit. Don’t be surprised! Remember that there are things that come along every so often like taxes on property, emissions testing, registration of your car, insurance renewal that you need to account for. Hold it in a savings account so you know it is there to pull from when you need it. Even $10 a month aside for oil changes makes it less likely you will ignore the fact that it needs done and will just pull it out and go do it. At the end of three months, when your oil change is due, you will have the $30 bucks it takes. When you are on a very tight budget, things like these are hard to squeeze in there.
House: Everything that has to do with your home from your mortgage to property taxes.
Utilities: Power, gas, water, phones, cable, internet.
Medical Bills: Insurance (If not automatically drawn out or if you want a record), everything medically related from co-pays and prescriptions to over the counter and vitamins.
Car: Gas, maintenance, payments, insurance (don’t forget the renewals if you have them).
Food: Groceries, eating out at home (not while working), eating out while working.
Extra: This encompasses everything else you might spend. Coffee, movies, clothes, a monthly amount for Christmas or birthdays.
Again, you get the idea. It will help you know how much you would expect to put in your envelopes if you haven’t gotten your bills yet too. List out anything that pertains to your household and put a monetary value on it and when you add it all up, it should not equal more than what your paychecks are. If it does, you need to find some way to cut back.
If you want to incorporate a third aspect of budgeting to your life, you can also make a list of what you spend on a daily basis. Post a paper where you will use it that has a column for food, cash, and fun. The staple bills are a given, or you can add those too under necessities. When you write a check or spend any money out of your envelopes, record it on your list for a visual of where you are spending and how much. You will quickly be able to see what stores are getting the bulk of your money each month, what months are the hardest on your wallet, and where you could possibly cut down or scale back to devote your dollars elsewhere. This is a great tool for those who respond well to visual things, the writing of the transactions make more of a mental note in your mind and the list will make you realize just how much you are letting go of.
Bottom line is you can learn to budget and live within your means. Stop charging and start saving. Take control of your finances and move forward in your life.