Making a budget and sticking to it, is half the battle in gaining control of your finances. In learning how to create a budget, the main thing the following steps will focus on is a budget tracking process.
- Tracking your expenditures
Using a simple pen and paper works best, so that you can easily make a note of each expense and the amount you spent on it. For example, if you buy a soda for $1, and you keep a running total, you’ll know how much you spent, and you’ll be more aware of your spending habits.
Also, note all your cash purchases so that you can track how much you spend each day. At the same time, keep track of all your daily expenses that you might pay with debit cards, automatic withdraws, etc. This will help you better recognize how much you spend each day and on which things, and you can find out where your cash is going. When creating a budget, your cash and credit expenses are often overlooked. This is because you might purchase something for $50 on a credit card, but you usually don’t see your actual purchase total until you add in your cash spend.
- Restricting your credit purchases
When you make nay purchases with a credit card, you have to opt in to them. This means that you have to opt in a prior to using a credit card, whether you’re using it for a particular purchase or for most purchases. When using a debit card, there are no benefits like this. When using these cards for purchases you make, you usually have to have the money in your checking account in order to cover the expense. It is best to set a budget limit for any credit card purchases such as topping off your credit card balance or making purchases that you know you can’t pay off right away.
- Cutting back on your frivolous expenses
When you sit down, after you track your expenses, look at your spending habits and determine where your money goes, you should find a few areas where you can cut down on spending. These areas are service bills, luxury goods, and entertainment.
Realizing that your income is limited, and that you have little else to spend, you should make the cut backs. By cutting back on your small amenities such as going out to eat, going to the movies, renting movies, or buying CD’s and DVD’s, you’re saving quite a bit in other areas that you may not have considered.
- Making a plan
Once you’ve made cut backs on your spending, take another look at your budget. Are there any areas that you can reduce your spending? Do you need to make cut backs to continue to get the things you want, such as a new car? It’s important to review your budget with your financial institution to make sure you can keep up with future payments, if needed.
While making changes in what you spend money on, it’s important to have a serious commitment to sticking to your budget, and making consistent changes. Your financial institution can help you to formulate a plan to stick with while you’re trying to go through your financial restructuring.
Once you’ve come up with a budget, it’s time to utilize the budget for more than the report. If I was to ask you to follow my earlier suggestion of tracking your spending, in addition to that, and I asked you to commit to lowering your expenses, wouldn’t you be happy to do so?
It’s important to use the budget to give you peace of mind. Not having to worry about where state your money is, when you can pay the bills, where to find the money to pay the bills comes very important in today’s society. Admitting that you have a problem with your budget can help pave the road to financial freedom.