Main reasons why people don’t do budgets because they find it boring, unnecessary, they don’t have time, find it difficult or lack the confidence in making money-related decisions.
Budgeting in 4 steps!
Step 1 – Track your expenses – There are two ways to do this. Hard way and easy way! I used to write everything down in a little notebook because as a little kid I watch my parents do it that way. Every day when they came from work, they would grab a book with a ruler and a pencil and write down their spending. So I did the same thing. In the end of the month, I would categorize everything and within 2 hours I would have results for the previous month. I knew I spent too much for groceries and I couldn’t balance the bank account because I missed few times log in a purchase. Then I tried excel spreadsheet, so categorizing became easy, If you have a spouse you might find yourself trying to figure out what he/she spend for what and in the end of month realizing I spent more then I planned. Then Xero came. It pulls every transaction and categorizes every swipe. I don’t have to chase my spouse or try to balance it and I can see real-time data. As soon as I am approaching my budgeted number, I cut my spending. Anything that will automate the process, your success rate will increase. I use Xero CashBooks, but I heard Mveleopes is really good as well. A free app is Mint, might be worth checking out.
Step 2- Essential versus pleasure – Ok, let’s say you have the perfect system to track your expenses. Let’s define essential – these are the ones, you can’t live without (in a way): for example; mortgage, utility bill, phone bill, food, dog food. And those for pleasure would be; restaurants, vacation, dates, clothes shopping including those Halloween costumes for your pooch! You get the pictures.
Step 3- Plan 0 or + budget – this one is hard. When creating a budget start with your projected income and subtract your essentials. Then subtract pleasure items without getting into red. If you are in red without getting to your pleasure items, you have an income problem. Pick up a part-time job or do a yard sale.
Step 4- Never give up, u get better at it over time. 😉
Either you will tell where the money goes, or you will wonder where it went! Your choice!