Budget like A Boss

Creating and Using a Budget

Even when the economy is good and you're living comfortably on the money you're making, it's a good idea to use a budget. Many people cringe when they hear that word because they think it means you can't have any fun or spend any money. That's far from the truth. Even a tight budget leaves room for fun and a little extra spending from time to time. A budget is an indispensable tool that can give you greater control over your finances. These tips make it easy to create a realistic budget that will work for you.

The 2014 Financial Literacy Survey, conducted by the Harris Poll, indicates that 61% of Americans don't use a budget! Are you one of these 61%? If so, you'll be glad to discover that it's fairly easy to create a budget that will help you gain control of your finances! Creating an effective budget has a number of benefits. By adopting a budget, you can make solid plans to achieve your financial goals and live the good life you deserve.

When you plan a budget, you must be realistic about what you're spending and saving. Don't say you spend $10 per week on lunches if you know you really spend $40. You can change the amounts later and cut back if necessary, but the first step is to get everything down on paper just as it is right now. That way, you can see what you are really spending.

You may be surprised. Usually, people who create an honest budget by tracking their spending each month and writing everything down find that they're shocked at how much they're paying out. It's not just the bills, but also the little things like lunches and dinners out, coffee in the morning, and small impulse purchases that add up.

For one month, keep track of every cent you spend. Avoid hiding anything or sweeping it under the rug. Save all your receipts and write them down. That means bills, spending money you withdrew from the bank, and anything else that was paid out in that time frame. At the end of the month, you'll have an accurate picture of what it's costing you to live for 30 days. I suggest you only use your debit card during this time to have a backup method for keeping an accurate count of your spending.

The best budgets are simple to follow, promote sound financial habits, and leave some room for a bit of fun and spontaneity.

Follow these steps to begin creating a budget that works for you:

1. Identify your income. You need to know the amount of your total income before you can decide how to save and spend your money.

* Get started by making a list of all of your sources of income, the amounts, and how frequently you're paid.

* Common sources of income include the paycheck from your regular job, as well as additional revenue streams. Additional income could come from a hobby or in the form of an irregular source, such as money earned from a yard sale.

2. List and categorize all your expenses. When creating your budget, carefully categorize and consider what portion of your income you're using on various types of expenses.

* Many budgeting templates advise you to classify your expenses into two categories: fixed and variable.

* If you have difficulty setting aside portions of your income for emergency savings and other financial goals, it can be helpful to further categorize your expenses in terms of wants and needs.

* Fixed expenses are those expenses that regularly occur for a set amount. Rent or mortgage payments, car payments, and insurance premiums are often different types of fixed payments.

* Variable expenses occur at irregular times or for irregular amounts. When creating a budget, it's important to have the means to accurately forecast the amount and timing of your variable expenses.

* One sure way to save more of your income is to consider whether an expense is a true want or need and reduce spending on the items that you merely want. This is a bit trickier than it sounds. For example, most of us would agree that food is a necessity, but the type of food that you choose to buy may reflect a want versus an actual need.

3. Leave room in your budget for a bit of freedom and excitement. Achieving a proper balance between spending and saving allows you to do things you enjoy while increasing your control over your finances.

4. Consider both sides of the equation. Just as you're tracking your expenses and setting goals to reduce spending, look for ways to increase your income.

* Taking on a second job during your spare time or selling off items that you infrequently use are two common ways to increase your income.

5. Eliminate tedious or boring budgeting tasks. You can maintain your enthusiasm to stick with your budget by using budgeting tools that automatically record and track your financial transactions.

6. Keep your budget relevant. Review and adjust your budget on a regular basis to account for revised goals, fluctuating costs, and other changes.

After you get over the initial shock of your tracking experiment, you'll likely want to find ways to spend less. There are many ways to lower expenses, and they can depend somewhat on how you spend your income and what’s important to you and your family. Everyone is different, and not every idea will apply to each person.

Consider these ideas in order to decrease how much you spend each month:

* Adjust the thermostat by a few degrees to save on electricity or gas.

* Skip going out for lunch and coffee by bringing these things from home.

* Change to a less expensive cable TV, Internet, or cell phone plan.

* Have a yard sale to get rid of unwanted items and make some quick cash. You can even use an app such as Mercari or Facebook Marketplace. Although, in these cases, you may have to ship the item.

* Carpool or use public transit and sell that second car, or at least to save on gas.

* Buy grocery items on sale and stock up on often-used items.

Of course, there are plenty of other ways to save. What works for one family might not work for another. However, in all likelihood, you really don't need the latest gadgets, the newest car, or brand-name clothing. You may want them, but that's not the same thing. How much are unnecessary things really costing you? Is it worth it? When you really think deeply about those questions, you'll likely find that living a little more frugally would give you a better quality of life and freedom to do more of the things you and your family really enjoy. Those things you all keep talking about doing, and the places you all keep talking about going.

Budgeting doesn't have to be depressing and minimalist. However, it can give you an accurate picture of what you're spending. Then, you can decide how to spend less - or if you even want to spend less - and make changes that will benefit you in the long run.

Enjoy Greater Financial Power with a Better Budget

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