The most difficult part of creating a personal budget is actually getting started. It seems so complex and overwhelming. And, let's be honest, it feels a little boring and restrictive. But creating a budget to meet your goals and support your preferred lifestyle is integral to your future financial success. A budget won't actually restrict you - if done correctly it will help your money work for you. Here is a nine step plan that can move your forward to financial success.
1. Set your goals in their order of priority based on which one you want to accomplish goals. What are your dreams and goals? Write them down and put them first. In parenthesis, write down how long you hope to meet each of the goals. This way you can create a budget that allows for both your immediate and your long-term goals.
2. Estimate your household income. Use take-home pay (net, not gross) and do not count any money that is not a guarantee (e.g., if you sometimes get overtime, but not always, do not count the overtime money as income).
3. Make a list of your expenses for the same period of time. Remember to include expenses that come up quarterly or annually, for example insurance premiums, Christmas, or property taxes. If you do not know what your expenses are, take the next month and write down each of your bills as they come in. You can use a spreadsheet if you’d like.
4. Spend the next two months writing down every penny you spend. (If you are listing your expenses as described in #3, you can do them at the same time.) If you are going to budget successfully, you will need to know where you are currently spending. Write it in pen and don’t forget to review it before bed every night.
5. Carefully review your expenditures – group your expenses in different ways to look for spending patterns. For example, do not group all food together – make a category for food purchased and prepared at home and a category for food eaten out. Are your spending patterns acceptable? Where can you cut expenses? Where are you not spending enough? Where are you spending too much?
6. Review the first goal on your Goal List. Do you currently have money to meet this goal? If not, adjust items on your budget sheet to make room the costs associated with meeting your first goal.
7. Try your newly crafted budget for a month to see if it is realistic. Continue to list every penny you spend during the month. You often need to adjust your life habits so carefully review what you are willing (and not willing to do) to meet your first goal. If you overspend in a category at this point, don’t sweat it yet.
8. At the end of your Trial Run month, carefully compare your budget to your actual spending. If you overspent in a category, carefully consider whether you should change your spending or change your budget.
9. Celebrate your new habit. At this point you have spent the last 4 months carefully considering your expenditures and spending patterns. You have been balancing your checkbook and paying attention to how you spend your money. In the meantime, you have started to save toward your first goal! Continue this new habit and you will be successful in meeting all of your future financial goals.
1. Set your goals in their order of priority based on which one you want to accomplish goals. What are your dreams and goals? Write them down and put them first. In parenthesis, write down how long you hope to meet each of the goals. This way you can create a budget that allows for both your immediate and your long-term goals.
2. Estimate your household income. Use take-home pay (net, not gross) and do not count any money that is not a guarantee (e.g., if you sometimes get overtime, but not always, do not count the overtime money as income).
3. Make a list of your expenses for the same period of time. Remember to include expenses that come up quarterly or annually, for example insurance premiums, Christmas, or property taxes. If you do not know what your expenses are, take the next month and write down each of your bills as they come in. You can use a spreadsheet if you’d like.
4. Spend the next two months writing down every penny you spend. (If you are listing your expenses as described in #3, you can do them at the same time.) If you are going to budget successfully, you will need to know where you are currently spending. Write it in pen and don’t forget to review it before bed every night.
5. Carefully review your expenditures – group your expenses in different ways to look for spending patterns. For example, do not group all food together – make a category for food purchased and prepared at home and a category for food eaten out. Are your spending patterns acceptable? Where can you cut expenses? Where are you not spending enough? Where are you spending too much?
6. Review the first goal on your Goal List. Do you currently have money to meet this goal? If not, adjust items on your budget sheet to make room the costs associated with meeting your first goal.
7. Try your newly crafted budget for a month to see if it is realistic. Continue to list every penny you spend during the month. You often need to adjust your life habits so carefully review what you are willing (and not willing to do) to meet your first goal. If you overspend in a category at this point, don’t sweat it yet.
8. At the end of your Trial Run month, carefully compare your budget to your actual spending. If you overspent in a category, carefully consider whether you should change your spending or change your budget.
9. Celebrate your new habit. At this point you have spent the last 4 months carefully considering your expenditures and spending patterns. You have been balancing your checkbook and paying attention to how you spend your money. In the meantime, you have started to save toward your first goal! Continue this new habit and you will be successful in meeting all of your future financial goals.
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