Budgeting Guide Made Simple
The purpose of budgeting is to make simple what seems like an eternal process, and by an eternal process I mean stressful, unorganized, and feeling like there’s no financial literacy to be found. The downside about learning how to budget is that there are so many resources about budgeting. It can be difficult to narrow down which one is an exact fit. Whether you’re looking to save for an emergency fund or fund your new brokerage account, this article will be of some help to you.
The Tools
Anything involving finances can be a headache, and oftentimes in terms of finances, your budget may be a mess, and that’s okay, too. You have to begin somewhere!
Decide What Your Goals Are
Before tracking your income, figure out what you’d like to achieve financially. These goals can be short term or long-term, and generally, when you have a clearer understanding of your goals, budgeting will be more valuable to you.
Income Tracking
Understanding how much income you have coming into your business or household is essential in beginning the budgeting process. Simply put, without understanding how much money you have, it is hard to budget exactly how much money can leave. However, you will need a way to track this money, and it can be done without extreme software or paying someone else.
Stay Organized
• Excel or Personal Notebook—Make sure your spreadsheets are clean-cut. Take note of all incoming and outgoing income for each month. You’ll need to know the last sum at the end of each month. This is crucial in understanding expenses as well. If Excel isn’t accessible to you, use a notebook. You could even use both for backup.
• Whichever platform you decide to use for tracking income, be sure that it has labeled columns. A good example of labels would look something like this: date, home, payer, food, personal, utilities, medical, other, and total.
Be sure to repeat these steps every month, beginning on the first of every month.
Expenses
• Keep in mind when budgeting how much your expenses are, as they should be less than or equal to your overall income. In some cases, total income may not seem flexible, and sometimes income may not be enough to cover your total expenses. When this happens, simply readjust your budget by deciding which expenses you can lower.
• Review what you spend money on—clothing, department stores, and dining out to eat—are good examples of places your money goes. Check all of your statements, and decide what you can cut back on. This will help you begin actually saving money.