Making Finance Easy – Budgeting And Goals
Live by a budget. Keeping track of what you earn and what you spend will enable you to alter your lifestyle to meet your goals.
Track Everything
The best way to start a budget is to keep track of everything you spend money on. You can use Microsoft Money or Quicken. You could use a spreadsheet program like Excel or Lotus. You can even track you spending on some notebook paper. Whatever you choose, write down everything. If you buy a can of soda at the gas station when you pay for your gasoline, write down how much you spent for “gas” and how much you spent on “dining out”. I know, a can of soda doesn’t sound like dining out, but you’ve got to categorize it somehow.
You’ll want to do this for three months, then average the amount spent for each category. Hopefully, your average monthly expenses will be less than your monthly income.
Prioritize
The next step is to put these expenses in order of priority. Most important on top. Even if you haven’t spent anything on it yet, the “saving/investing” category should be the very first one. Other important categories might include: mortgage/rent, groceries, electric, life/health insurance, and on and on. Categories at the bottom will likely be things like movie rentals, dining out, etc.
Are you happy with the amount you’re spending on each category? You may be surprised at how much you’ve spent on items you believe are very frivolous (I get dizzy thinking about how much I’ve spent on our saltwater aquarium). Write down what you would like to spend next to what you are actually spending. Remember, the total of what you’d like to spend can’t exceed your monthly take-home pay.
Short-term Goals
These budgeted amounts you write down are short-term goals, so they must be realistic. If you’re spending $180/month on gasoline, don’t think you’ll be able to drop that amount in half. Unless you are changing jobs so you’re closer to home or thinking about biking to work, gasoline is a pretty static cost. And don’t make your budget goals something that you’ve got nothing to strive for. If you are spending $410/month dining out and you budget $300, you’ll likely just become a poor tipper. Challenge yourself.
Goals should be at a level that requires discipline and determination to reach them, but not so high that they are unattainable. If you’re goals are too extreme, you’ll soon become discouraged and not make any more goals.
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