It Really, Really Helps to Have a Budget
Budget. Most people hate that word- I know I did, until I finally understood that a budget is your best financial friend. I always thought that I had a good grasp of my monthly income and expenses, even though all my documentation was “in my head”. I knew where my money went, so I didn’t need to write anything down, right? Well…no. When I finally started to formally document my expenses and income, I found that I was way off track.
It’s simple to start a budget, actually. First, you need to determine how much monthly income you (and your partner, if you’re in a relationship) have coming in. That includes not only your pay from your employer, but any other money you have coming in as well (from a side job, dividends, etc). After you have your income figured out, you need to take a look at your expenses. The first part of this is simple; you need to list your fixed expenses, such as a mortgage or car loan, and any other bill you have to pay regularly each month. The next part is the tricky bit; you need to track down where the rest of your cash goes. Expenses such as groceries, gas, and entertainment will vary from month to month. You can use things like your cash and ATM receipts to help with this, as well as your checkbook. For me, my banking app was very helpful in tracking down my more elusive expenses.
Once you have all your information together, subtract your expenses from your income. Hopefully your income exceeds your expenses; if so great! You are living below your means. If it turns out that your expenses are higher than your income, oops! But don’t panic- that just means that you need to make some adjustments to your monthly expenses. And now that you have done your homework and have all your budget information together, you may find that even small adjustments here and there can greatly improve your situation.
Above all, don’t be afraid to create a budget. Even if your finances aren’t in the best shape, you can’t begin to improve things for yourself unless you have a handle on your income and expenses. A budget is the best tool to help you do just that.