Before you actually create your new budget, you’ll need to spend some time in the budget planning process. This is a critical first step that is necessary in order to develop a budget that you can adhere to. While you want to cut out unnecessary spending, you also want to make sure that the needs of you and your family are taken care of and that you are planning for the future as well.
One of the most useful things you can do during this process is to write down virtually every dime you spend. You may want to keep a small notebook in your purse, briefcase, or car so that you can write down every expense in one area. Don’t just depend on your checkbook register or debit card transaction sheet. If you spend any cash at all, you will want something handy with which to record every single expenditure.
It will also be helpful if you keep any receipts so that you can track how much you are spending and for what. Suppose you go to the grocery store and spend $75. You don’t want to write down the full amount under the category of groceries if part of that amount was actually spent on toiletries or household items. While it will be a little work at first, it is important to separate your expenditures into categories so that you will know how much to budget for each category.
Another part of the budget planning process is to write down every category and every expense you are anticipating over the next year. Remember to figure in one time expenses, such as car registration and income tax payments. If you anticipate a refund, you will want to add that amount to your income and budget accordingly. Of course, if you can stick that amount in savings without touching it, then that may be the best thing to do. However, if you need to count any bonuses or tax refunds as part of your income, then do so from the beginning so that you don’t run the risk of the money simply frittering away.
Be prepared for your budget to fluctuate the first few months and react accordingly. Almost everyone has to tweak their budget when they first begin until they get a realistic idea of exactly how much they need to live on and how best to allocate any extra money. The budget planning process is a crucial step you must take before you can expect to follow a strict budget, but the time you spend at the outset will ensure you have a more realistic budget to follow.