I know, that as much as everyone hates doing it, the first step to financial stability is coming up with a good budget. Now sure, anyone can throw a bunch of numbers on a spreadsheet, under the columns of expenses and revenue. But I think there’s a little more to it than that. At least, if you want it to be something you can live with, and something that will keep the tax man up in Washington DC happy.
There are plenty of people, that think a budget is not really necessary, and perhaps your one of them. Sure, you may be getting along without one, but maybe you’d like to be doing a little better financially. Maybe it would be nice to have a little money left over in the bank account at the end of the month. Perhaps you could use a little extra money to take that nice vacation your spouse keeps talking about. A better school for your kids? A nicer house, or maybe finally you can replace that old car without going in too much debt. Taking control of your expenses and revenues, and understanding in detail where all the money is coming from, and where it is going to is essential to making changes in your life.
Now that I’ve convinced you a budget can be a good thing, the next step before starting is to get the right perspective. First and foremost, you need to be brutally honest about the numbers you put into your budget. While the revenue side of things, is usually not too hard. Your pay check is what it is. It’s the expenses that can be tricky for some people. If you spend $300 per month on going to the movies. Or you spend $500 on cigarettes and booze each month, then you need to record that accurately into your budget spreadsheet. No one else has to see this but you. A personal budget is not about right or wrong, it’s about understanding where the money goes to each month, and ultimately deciding if those things are a priority for you.
It’s always good to start with you actual living expenses in the beginning. So, grab those utility bills, credit card statements, phone bills, and check book to get started. There are certain expenses that are avoidable for living, and those all need to be recorded. Remember, in the initial stages, it’s important to be as accurate as possible. Once that’s all completed, then you can start thinking of prioritizing and making alternative choices when it comes to your money.
What you will likely find, is that spending less money doesn’t always mean doing without. Sometimes yes, but not always. Perhaps your cell phone plan has got more features on it than you use anymore. Come renewal time, it would be a good idea to pick a plan that more closely reflects your use. For instance, do you have a land line, and a cell phone? Many people these days are dumping their land lines altogether. When everyone in the house has a cell phone, it does seem to make an extra home phone superfluous.
If your doing a budget these days, then chances are there’s a reason for it. Either your income has been substantially reduced, or your considering a lifestyle change that will require more funds. Either way a budget can be a big help. When taking on a major financial purchase like a new home, car or boat, it may be a good time to keep the little daily expenses in check. Give your credit card a break, and cut back on the little stuff for a while. One final point to keep in mind. Once you have a budget plan worked out, be sure to stick with it. That’s the whole point isn’t it. It will take a little discipline, but after a few months or weeks it should become habit.