The thought of budgeting may feel difficult and add additional stress but if you break it down into sections it is not as daunting as Xone may think. No matter what your financial situation is, budgeting can help you understand where your money is going every month and where you can make changes. Budgeting does not mean you have to sacrifice everything; you just have to make sure that it fits in your monthly expenses. The longer you wait to start budgeting the more money you could be wasting. Here are three steps to make you budget run smooth.
Build your budget:
This is the step that may make you cringe. Everyone thinks they know where their money is going but until you put pen to paper and write it all down, do you really?
Categorize the spending and focus on the areas you can control. The main categories to look at are:
- Fixed expenses – these items usually have a set payment such as rent, mortgage, insurance, car payments.
- Variable expenses - these items are a required payment each month but fluctuate slightly. The most common variable expenses are utilities.
- Intermittent expenses – this is Xone area that many people tend to forget about. We are great at remembering month to month costs but things that arise once or twice a year tend to get missed. When looking at these expenses, consider maintenance on your home or car, birthday or holiday expenses and back to school expenses you make once a year.
- Discretionary expenses – this is the area where you should be really looking at how much you are spending. This is the area you have the most control over. This can include groceries, dining out, entertainment, memberships, gas, personal expenses and leisure activities.
Now that you have everything on paper, look at your spending and decide is this an amount that you are comfortable with or can you try to scale back and reduce anything. How often are you using that gym membership? Could you cancel or pause it? Would carpooling, biking or walking to work be an option? Are you going to the grocery store with a plan and list or are you aimlessly roaming the isles? All questions to consider when looking at where your money is going every month.
Consider consulting a budgeting template to help stay on track.
Track your spending and monitor the process:
Now that you know where your money is going and how much you want to spend in every area, start tracking your monthly expenses. This can be done in multiple ways. Utilize different phone apps, a digital notepad, keep receipts or ledger books. Pick the tool that will work the best for you.
At the end of the month, sit and calculate all your expenses and see if what you allotted to each is where you ended up. Are you on the right track or is there an area that didn’t quite add up the way you wanted?
When you look at each month and notice changes consider why that area is higher than expected, is this a one-time expense that pushed the budget, or did you forget items when you originally created it?
This area will take the most time. You will need to monitor your spending for a few months to see if the budget you set out is working.
Make the necessary changes:
What you think worked for you at the start of the budget may not work for you three months from now. You will constantly have to adjust the budget as you notice trends or changes in either your income or expenses.
Budgeting is a lifelong task; we will always have incomes of some kind coming in and we need to ensure the expenses going out are balanced. Don’t get discouraged if at first the budget doesn’t work, readjust, and try again. XOnce you start to see that your budgeting process works, you will find each month becomes easier and easier, and you will enjoy financial success.