The first thing to do when making yourself a new budget, is to take good notes on how your funds are currently being used. In order to track your cash flow properly, it’s best to write down every penny you spend for a good week or two (instead of trying to estimate from what you remember, which is often missing plenty of small stuff). Keeping proper track of everything from monthly bill payments to that coffee and donut in the morning lets you get a true impression of exactly where your cash is going. Don’t neglect to write down each and every little thing bought or paid, you’ll see that even the smallest of things can really start to add up over time.
Getting Started With Your Personal Budget:
- If you’ve got a spreadsheet program (like Excel) – go ahead and use it to quickly lay out all of you expenses. This will save you having to tally up the numbers as you go along. If that’s not an option, just use a sheet of paper to make a note of everything, then add them up to get your monthly expenses.
- In a new column in your spreadsheet (or draw a line and write it on the other side of that paper), do the same thing for your income. Write down and add up your total earnings for the month to get your monthly income.
Once you’ve got your expenses and income all noted – subtract the total expenses from your earnings, and you’ll know exactly where you stand at the end of the month. If you find yourself spending more than you take in every month (or getting close to that point), now’s the time to analyze your spending and decide on how to balance things.
How you adjust your spending habits (if at all) will depend a lot on what your personal financial goals are. If you end up without any money left at the end of the month, it’s hard to do much regardless of how modest your aspirations may be. As long as you’re not struggling to keep up and can save at least a little to put aside for unexpected bills (car repairs, medical expenses), you may not have to change anything.
If you’re getting into problems trying to make ends meet, or working hard to have something left at the end of the month to save; start by recognizing costs that can easily be cut first. That morning newspaper or cup of coffee, eating out and other luxuries can be replaced with cheaper alternatives. You might be surprised that when you multiply this over the month, the savings can add up to hundreds, often more than enough to turn the tide financially.
These days a lot of us have subscription services that we can live without. Are you paying too much on your phone bill or subscribing to extended cable? When things are tight, see if there are things you can reduce or live without altogether.
If you’ve already done what you can to minimize unnecessary expenses still can’t balance your books, you need to see if it is possible to save on the costs of carrying the debt you have.
Is it possible to get a lower mortgage rate? Maybe a better interest rate on your credit cards? If you’re wasting a large percentage of your monthly income on interest charges alone, a debt consolidation program or other types of financial services could be something to consider.
Don’t be afraid to take a detailed look at your personal circumstances to reveal where and when you may be spending more than you should.