Budgeting doesn’t have to be rocket science. The basic principle of making a budget is to record how much money you have coming in for the month. From that you subtract expenses for the month. First subtract necessary expenses (rent, mortgage, car payments, insurance, food, etc). Once you subtract the necessary expenses, the remaining amount can be used for savings and other expenses.
One line item should be savings. To get ahead you should start paying yourself first. Some suggest 15% of your income, but if you can’t afford that, start with what you can afford and increase it over time. Many people think they can’t afford to pay themselves first. Why work all the time and have nothing to show for it? If you think you don’t have any extra money for this, take a look at what you have been spending your money on and see where expenses can be cut.
Live within or below your means. If you constantly spend more than you make each month, you will continue getting in deeper debt.
One way to get your expenses under control, is to track your expenses. For one week, write down everything you spend money on each day. At the end of the week, you will see where your money is going and can determine if there are ways to cut expenses.
Saving is a discipline and needs to become a habit. Have the discipline to wait until you have the money saved to purchase something you want. Too many people give into the instant gratification of purchasing items that they want that they cannot afford. Live below or within your means. It’s also important to have an emergency fund in the event of unexpected medical expenses and job layoffs, etc.
Once you get in the habit of making a monthly budget and living by it, it will get easier and not feel as restrictive as you may think.
Tags: budgeting, debt, emergency fund, expenses, income, money habits, saving money
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