We’ve talked about this many times in the past and, simply put, the big difference between financially secure people and those who are not usually boils down to one specific thing; a budget. People who create and, of course, use a budget are usually more secure financially, have less debt and have higher credit scores then people who don’t.
If you still don’t have a budget and really don’t have a clue as to how you should start, the tips below will get you there and allow you to begin taking better control of your finances right now, today. Enjoy.
Your 1st step is to look at the exact amount of money you spent per month over the last three or four months. If you primarily use a credit or debit card for the majority of your purposes, finding out this number is as simple as logging into your bank’s dashboard to see your transaction history. If you’re the kind of person that uses cash for most of your transactions and purchases however, it will be a little bit more involved as you’ll need to look at how much money came in, and how much money you had left at the end of the last two or three months, in order to determine how much you spent.
If that’s not possible, then at the beginning of the next month you should get a paper notebook or app and start keeping track of everything, and every purchase, that you make. (Yes, it might be slightly tedious but it’s vital to your financial future.)
What you’re looking for is where exactly your money has been going. This is the information you need to figure out if you’ve been spending too much on certain things like entertainment, eating out, clothes and other “non- essential” items. Knowing exactly what you’ve spent is a vital part of putting together your first budget but, frankly, the next step is more important.
That 2nd step is making a plan to address your overspending.
Let’s say, for the sake of example, that you make $2400 after taxes every month. Now let’s say that you spend;
- $1100 on housing
- Florida dollars on groceries
- $300 on entertainment
- $100 on your phone
- $750 on other expenses
Guess what bucko, you’re spending $2650 a month or $250 more than you actually make! Looking at those numbers is easy to see that there’s a problem, but the question that’s more important is how to address it, change it and fix it.
Since a budget is basically a spending plan what you’ll need to do is write down how much you’re willing to spend on each of those categories the following month and, more importantly, decide where to eliminate or at least cut back on spending. Will you eat out less, spend less on entertainment or change your phone plan? What about clothing and $7.00 lattes at Starbucks?
Whatever you need to do to whittle that spending down to $2400 (or less if possible), you’ll need to do it if you want to get your spending and your finances under control and stay in control.
Your 3rd step is to simply track your spending. Once you’ve categorized your spending (and you can make as many categories as you like) you need a system to track it. That’s about as simple as it gets these days with the plethora of spreadsheet programs or online budgeting apps available. Frankly, without one of these you’ll never be able to stick your budget so do yourself a favor and pick one up ASAP.
Actually, you might find out that keeping a budget is actually a bit of fun, especially when you see how much money you’re actually managing to save.
Every day, or at least once a week, check your spreadsheet and make sure that you’re not over your budget on any one particular category. Did you spend $80 today on groceries? Make sure you noted on your spreadsheet and see how much you have left for the rest of the month. Once you get the hang of it you’ll actually become quite skilled at making your money last longer, something that will inevitably help you to start putting away into a retirement account, paying down your debt or funding an emergency account.