If you’re looking to create wealth one of the first things that you’re going to need to do is make a budget and stick to it. Making the budget isn’t hard at all really and that’s what we’re going to be focusing on in this article. (Sticking to the budget can be more difficult but having no budget at all is worse.)
The very first thing that you need to do when creating a budget is to determine how much actual income that you are making. This needs to include your income and, if you have one, your spouse’s income too. You will also want to take into account any other sources of income that you have such as interest from savings, dividends from stock options, money that you make on a side job and so forth.
Note down every single income source and how much income it generates and put this information aside. (Do this for a month’s time, not a whole year.)
The next step is a little more difficult; you will now need to track all of your monthly expenses. Start with the easy stuff like car payments, electric and other bills, your mortgage, insurance and taxes. These expenses seldom change drastically and thus are easier to factor in.
After you have all that info it’s time to go even further. Take out your checkbook or the latest bank statement and note down ALL your other expenses. Gasoline, groceries, entertainment, subscriptions to magazines, cable and so forth. This may take a while do it as best as you can.
Once you have an exhaustive list of all your monthly expenses it’s time for the fun part; adding both the income list and the expense list and subtracting the latter from the former to see where you come out.
If you end up with a positive number you can pat yourself on the back because you’re already spending less than what you make, a cardinal rule in budgeting.
If you end up with a negative number don’t despair. Now that you know where your money is going you can put the steps in place (a budget) to get those totals reversed.
No matter the outcome you now have a solid foundation on which to build your new budget and start building wealth. If you were already spending less than you make keep up the good work and if you weren’t you now know where you can cut back. Good luck.