When I was younger creating a budget really didn’t come to mind unless I wanted to buy something of my own. I would save coins and dollars in my cute little wallet and then when I was ready, I’d go buy said doll or toy. Other times I would just deposit it into my savings account my mom had set up for me and let it grow. Now that I am older and living on my own this lesson has turned into a habit and teaching myself to only spend what I can afford. This includes expenses on credit cards as well but that’s a whole other venture. Here are some things to keep in mind when creating your own budget.
Track it: when I was younger I watched my mom balance her checkbook. Checks are not as prominent as they used to be. So putting into today’s terms, anytime she swiped her card or used cash, she recorded it into a log. She recorded the date, the amount, who and what the expense was for. Nowadays almost everyone has online and mobile banking but it’s good to keep a digital or written record of things either on an Excel spreadsheet or in a notebook. That way if you need to look back to see what your balance or what expenses have already come out the account.
Keep it: It is a good rule to keep records, copies, digital copies of bank statements for seven years. If one is buying a home or being audited by the IRS it is good to keep them just in case. Anything over seven years, carefully shred, burn or take to your local shred place to dispose of these sensitive documents.
Categorize it: Once you have tracked your expenses for a whole month, look back on it and categorize everything. Rent, mortgage, dining out, utilities, entertainment etc. You can make cool charts show much much you spend in each category.
Simple math: Add up your expenses and subtract from your income of the month. Or visa versa. This shows how much cushion you have to either save, play with or pay down other debts with.
Review and Analyze: when I first did this, I was a few hundred in the negative. I was spending more than I had. Essentially with some motivation, I got a better paying job and decided to venture into other means of getting more income and now it’s much better. I also looked into what I was spending it on. Like coffee trips. Buy a $5 cup of coffee a day can get really expensive. That’s $1825 in a year- that could be a trip somewhere or a mortgage payment. Sure, splurges like that are cool every now and again, not all the time. So I ended up buying a decent coffee maker, coffee and creamer. Sure, it’s not a latte but I’m saving up for that espresso machine.
Set Amounts: set an amount for each category of expense. For example: for eating out $200 a month or for entertainment $200. Set each category that you know is achievable and attainable to your lifestyle. Its okay not to meet your budget every single month just know what you are able to afford or not.
Financial goals: Essentially, my short term financial goal with setting a budget is to save enough for six months worth of living expenses. Long term would be having enough to send my grandchildren to school and pay for yearly family vacations. Its good to have goals. Short term and long term. And budgeting can help with that.
Keeping a budget can be very useful for all ages, in tracking expenses, income and keeping track of your financial goals! I hope this blog tip on budgeting was helpful! If you liked please like, share and comment! Oh and don’t forget to subscribe!
Keep Kicking and Smiling! -TJ Banski