Five Steps to doing a budget right
Budgeting is the recipe for financial success, to know what you owe and when you owe it, and to keep track of your finances to pay that money out.
A lot of people who don’t do well financially have something in common with their budget: it’s in their head, or they don’t have one. It’s important to rectify this if this is your situation, the only way to financial success is through organization.
Budgeting is a great way to organize your financial life, to track your expenses and income, and to start building a healthier future. This article is going to overview five tips to not only make a budget, but to do so successfully.
List every expense you have
Be honest with yourself. Be thorough with yourself. If you pay for newspaper subscriptions it should be listed as an expense. If you buy coffee in the morning, it’s currently an expense. It’s only by making a full and accurate list of your expenses that you can evaluate them, cutting unnecessary ones and altering others to lower your expenses. Even more than that though, it’s only by making a list that you can be sure you can afford everything on the list.
Be realistic when altering your budget
It may be tempting to freak out when you see your list of expenses, vowing never to spend a dime again. Don’t do this. Drawing a budget stresses every one out, but it’s just designed to show you where your money is going, and give you the control back. While alterations are often encouraged, you have to be extremely careful to ensure that you’re being realistic – or you’ll end up abandoning all changes and plunging yourself further into a bad situation.
Budgeting is not about spending nothing. Budgeting is about accounting for your spending, being honest with yourself and willing to look at it. You can make great progress just by understanding your expenses, and if you have changes you’d like to make that’s great – just be realistic about them.
Review your budget frequently
Commit to sitting down once a month with your partner to discuss the budget. Did you stick to it this month? Why/why not? Are you going to use the same budget going forward? How will it change?
These questions are completely normal, natural, and evaluative – a key sign of a successful budget. Being willing to puzzle through your budget to find what works for you is the best sign of a commitment to that budget.
Set budgeting goals
Budgeting can be hard to live by, but not if you’re realistic and set yourself toward something. Develop a savings goal, and start working towards it. Having a goal will encourage you along the way, knowing you’re budgeting for a house, or for a family, and can be huge in keeping your motivation up.
It’s also a great way to encourage yourself by having a target, and once you reach that target you will feel the success flow through you and be motivated to pick a new one. Budgeting is really empowering, it doesn’t have to be terrible and stressful.
Track your progress
You can use technology to assist in tracking your progress on budgeting. Start paying your bills through internet banking, keeping up to date on everything wherever possible and allowing you to hold up your list of bills against the payments that have gone out directly.