There are a number of ways to start a budget from the traditional to the technological. Whichever approach you take, make sure you’re committed to the success of creating, maintaining, tracking, and sticking with your budget.
Budgets are as much about mindset as they are about financial numbers. Budgeting will help you live within your means and push you towards financial success.
Steps in Starting a Budget
- Clarify your vision and set financial goals. You’ll need to have a clear picture of the type of life you want to live. Then, set financial goals related to that vision.
- Gather one month’s income sources. Get a better understanding of how much money comes in each month. Income sources come from paychecks, dividends, alimony, interest payments, etc.
- Gather one month’s expenses. List all your monthly expenses and debt obligations. Your expenses include rent, auto loan payments, utility bills, services like cellphone charges, subscriptions such as Netflix, monthly gas expenses, and ATM receipts, and any receipts for one month (dining, movies, random purchases, birthday gifts, etc).
- Create categories. Place your income into one pile. Categorize your expenses into housing, transportation, utilities, entertainment, food, discretionary, etc.
- Calculate the totals of each pile. Take a piece of paper or excel sheet and type in the information. Deduct expenses from income.
Are you spending more than you’re making? Then it is time to adjust and make changes.
The information you gather from the traditional approach is an accurate depiction of your actual spending lifestyle.
This is a simple way of understanding what’s coming in and going out. Based on the information you discover, you may uncover some additional financial goals such as debt repayment or purchase of a luxury good.