Learning a money budgeting system is a critical first step to take control over your finances. Today, more than ever, you need to handle your money carefully and wisely. In case you’re having second thoughts about setting up a budget, remember that either you manage your money, or let your money manage you.
“The way you handle money budgeting will determine whether you’ll spend your life on the passenger seat, or on the driver seat”
Did you know that money is the leading cause of disagreements in marriages? This is reason enough to organize your personal expenses through a financial plan. Having a money budgeting plan opens your eyes, puts things into perspective, and helps you establish priorities. When you start tracking your personal spending you’ll realize that those little things add up quickly. Your trip to Starbucks five times a week can add up to $750 a year.
Setting Up a Budget
In order to simplify your money budgeting process, you should have separate folders/envelopes for all records of your income and home expenses such as: bank statements, investment accounts, utility bills, receipts, etc. Then, on a personal spreadsheet (i.e. Excel), start entering each item in the appropriate column.
When making a finance household budget, you should include 3 elements: Income, Personal Expenses, and Financial Goals.
1. Monthly Income: Salary, investments, other income (rental properties, etc.)
2. Monthly Expenses – Fixed – These are expenses that stay the same or change very little each month, such as food, clothing, laundry/cleaning, utilities, telephone/mobile, satellite/cable TV, household expenses, health care, insurance, loans, education, entertainment, personal care, rent/mortgage, travel, gifts, medical expenses, child care, taxes, etc. These are for the most part, essential home expenses.
3. Monthly Expenses – Variable – These are expenses that change each month, such as gasoline, car repairs, etc. Here’s where you can make some adjustments in your personal family budgeting if you need to reduce home expenses.
As soon as possible, start setting aside money for these “unexpected” personal expenditures. This will make your life a lot easier without the stressful “unforeseen circumstances” of life
Personal Home Budget Goals -Knowing how to budget money and maintaining a money budgeting program is not enough incentive to keep you motivated, you need to set your own financial goals to keep you moving forward until you accomplish them.
Why You Need A Budget
You need a finance household budget to know where each dollar is coming from and where it’s going. You also need to develop a financial plan for consistency; this is crucial to achieve your financial goals. Look at the benefits of learning how to money budgeting:
- You know where you are and how far you need to go
- Getting organized frees up your time
- You have control of your money
- Helps you to avoid arguments about money
- Gives you a better idea of what you can afford
- Gives you piece of mind
- Eliminates your debts
- Gives you additional money
- Helps you achieve your financial goals
You should keep track of your home expenses for at least one month. You can then calculate how much money you have left over after subtracting all your personal expenses from your income. If you have extra money, you can use it to pay off debts, set it aside for savings or investments.
If you’re having problems staying within your personal spending program, then you need to find some areas where you can cut down your expenses. Here are a few examples:
- Carpooling to work
- Bring lunch to work
- Eat out less often
- Find a cheaper phone plan
- Switch to a basic Satellite/Cable TV plan
- Shop around for lower insurance rates
- Consolidate your loans to lock in lower rates
Another option is to increase your income. Consider renting a room, getting a part-time job on weekends, or provide a service a couple of days a week using your skills.
Learning money budgeting and living on a budget is not easy at the beginning, but the rewards are worth the effort. You just need to stick to it until you can see some satisfactory results. Getting to this stage of personal money control will give you an incentive to continue improving your financial outlook. Lastly, you have another option: software budgeting.