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Creating a Financial Diet

 

Have you ever been on a diet? Why? Maybe you wanted to lose weight, maybe you wanted to be healthier, maybe you just wanted to operate at the best your body could operate at. Whatever the reason, chances are you recognized that changing your diet, your plan for what you are eating, would change your life. A budget operates in the same way, for your financial life.

A lot of people balk at the idea of a budget, but really it is just a plan that details where you are and helps you get where you’re going. However, like diets, lots of people get burnt out. “I tried budgeting before.” “It’s just not for me” “I can’t do it”. These negative thoughts are extremely common – don’t feel bad – but don’t let them stop you either!

This article is going to go over how to create an effective financial diet for you, the budget that can help you get where you want to go.

So where do we begin?

The first things first, choose how/where you’re going to record your budget. Are you a notebook guy/gal or is Excel more your speed? Maybe you’d like a specialist budgeting software to do it for you, but whatever your preference is get the tools you’ll need to begin in front of you. There’s nothing worse than having all the plans up in your head to budget, but none of it recorded for accountability.

Now that you have the tool that’s going to work for you, sit down and figure out exactly what you and your partner make in a month. This is your monthly income, of course not all of it is free.

Take some time to record your expenses: everything from the mobile phone to the laundromat trips you make (and how often you make them). This can be a great time to sit down and really think about your expenses, and to trim unnecessary ones. Part of budgeting is developing financial discipline to understand the difference between needs and wants- and deciding which will be included in your current plan. By taking the time to assess your expenses, you ensure you have as few as possible (and thus as much leftover as possible). Once you have your total expense figure, subtract your expenses from your income.

Chances are by now you have at least a little leftover. Try to set up some goals here. Experts recommend saving at least 10% of what you earn, this could be something you’re aiming for. Maybe you have a large savings goal you can use the leftover for. Whatever you decide, make sure to try to stick to it.

What then?

Now that you have a budget, you may be wondering about the next step. Whatever you do, don’t forget where you’ve stored your budget. Don’t make it the file/paper you never look at again, you took time crafting a carefully laid plan – keep it handy.

Over the coming months, record your spending. Track your expenses. Were they in line with what you thought? Did you forget to include something that’s necessary? Adjust as necessary. A budget is not written in stone, it is meant to grow with you.

Remember

You get out of a budget what you put into it. Financially dieting can seem painful at first, but it can literally pay off in the end by helping you to spend (and save) wisely.