A budget is something that everyone should have. If you’ve never taken the time to create a budget, you may feel overwhelmed. Don’t.
It’s actually much easier than you think. It does take a bit of time, but it will make a difference in your finances. Let’s take a closer look at how to create a simple budget for beginners.
Write Down Your Monthly Expenses
First things first. Write down what you must pay for each month. This includes mortgage/rent, utilities, car payment, insurance, credit card/loan payments, grocery/household items, entertainment, clothing, prescriptions, and any other expense categories that you must pay for each month.
Remember Your Bi-Yearly and Yearly Expenses
There are expenses you pay for each month, but there are also those things you only pay for once or twice a year. For example, you may have property taxes you pay once a year or you may pay for your car insurance every six months.
You also need to account for those large yearly expenses, such as Christmas or summer vacation. Having these expenses built into your monthly expenses and putting the money into savings throughout the year will make these expenses easier to handle.
Track Your Spending
Variable expenses can be hard to estimate. This is why you want to track your spending for at least 2 months. This will give you a better idea of how much you’re spending on groceries, gas, entertainment, fast food, etc. This can be an eye-opening experience and can also help you be smarter about how much money you spend.
Compare Money In to Money Out
You need to look at your income compared to your spending. Are you spending more money than you have coming in each month? If so, this is a huge problem.
You will never get out of debt if you allow yourself to spend more than you’re making. Many people in financial trouble are in that position because they are living above their means.
Make Cuts Where Necessary
Last, but not least, look over the list of what you spent for the last two months and consider what you can cut.
If you enjoy watching TV, but don’t love spending $150 per month, look into a streaming service that allows you to watch your favorite channels at a fraction of the cost of satellite or cable. If you spend way more than expected on groceries, consider how much food your family is eating and how much is wasted. Many families are guilty of over-buying.
Be Willing to Adjust Your Budget
If you've never made a budget before, it can take a few months to get all the kinks worked out. So, don't expect it to be perfect the first month. Be willing to adjust the budget as necessary, and you'll get better at it each month.
If you want to take control of your finances, a budget is a great place to start. Best of all, it’s easy to do, it just takes time.