How to Budget – A Simple Plan

How to Budget

how to budgetIf you’re looking for some advice about how to budget, you’ve come to the right place. Learning how to budget may seem like an insurmountable task at first, but once you get going it can be liberating. Budgeting allows you to take control of your financial life and empowers you to live the life you choose, within your means. If you’re new to budgeting or have budgeted before but are now out of practice, there are several steps you can take to get your life back on a budget.  You can learn how to budget with some simple steps.

Learn How to Budget – Where is the Money Going?

The most important step learn how to budget is to find out where your money is going. If you aren’t fully conscious of your current and past spending habits, you won’t be prepared to budget accordingly.  In addition, seeing the total amount that little purchases actually add up to over the course of a month can be enlightening. For example, a soda or coffee here and there may seem like nothing in the moment, but over the time can really add up to a big chunk of change. To learn how to budget you really need to see where ALL of your money is going.

Learn How to Budget – Track Expenses

To accomplish this step, choose a method to track expenses. It doesn’t need to be fancy. A simple pen and small notebook can work. Or if you purchase everything with a debit card, you can just print out your bank statements and categorize items. Make it a habit to record every penny you spend for at least a month. Then, take a day to look over these records. This will help you learn how to budget.

The next step to learn how to budget is to find how much money you are bringing in. Go through your pay stubs or bank account records and add up your total income from the past 12 months. Divide this total by 12 to find your average monthly income so you know what you realistically have to work with. During this step, don’t forget to also include other sources of income you make throughout the year like investment interest, child support or alimony.  All this will help you learn how to budget.

From here, you can analyze your monthly expenses and average monthly income to get an idea of where to start when you’re ready to learn how to budget. Hopefully your expenses have been less than your income. If not, you’re going to need a stricter budget.

Make a list of expense categories a piece of paper. First, make allowances for categories that you can’t compromise on such as rent, basic utilities and insurance. Next, look over your past expenses and make a realistic budget for each category you spent money on. Take extra time on this last portion of the budget.  To learn how to budget, you’ll want to try to cut some corners if you’re looking to lower your monthly expenses, but at the same time, making your budget too sparse will set you up for failure. Don’t bite off more than you can chew, but take small steps toward your goals.  When you’re ready to learn how to budget, you will find you have taken real control of your financial life.