Anyone will tell you that one of the most important parts of managing your finances is learning to budget and stick to it. But how do you even create a budget? What are the key tips you should utilize in drawing up a budget for yourself and your family? How can you create a realistic budget? Today, with our friends from Project Eve, we bring you some PRACTICAL top tips for budgeting
1. Make a decision and act on it:
It might surprise you to know that more than 50% of people give up the budgeting process because they think it is too tedious. But if you have finally decided to budget and decided to stick with it then you have already won half the battle. Don’t let this process overwhelm you at any point, nor scare you into quitting. This is for your own good and financial security.
2. Why Are You Creating the Budget?
This is the question you have to answer before you sit down to do anything else. Is it for your own financial security or that of your family? Do you wish to make a large purchase sometime in the future? Do you have to pay off a debt? Different types of situations demand different types of budgets. For some, you might have to go to extremes and for others, not so much.
3. Determine How Much You Have
And that means everything. Cash at hand, cash in the bank, checking accounts, personal savings, bonds, etc. All this information will help you determine the interest rate as well as their expenses. Keeping proper information of such things will not only help you now, but it will also help you to determine your overall net worth.
4. Determine Your Monthly Income
Even if you get paid on an hourly or weekly basis, make a note of all you make in a month. That includes all the bonuses, extra jobs and such. For people with alternate jobs and fluctuating payments, they take can an average of the payment they received for the last six months or so.
5. Do You Have A Debt?
Your first and foremost priority should be to get rid of the debt you owe (if any) even if that isn’t the reason you wanted to create the budget. Paying off the debt as soon as possible will allow you to save money more effectively without worrying about the interest on the debt growing.
6. What is Your Net Worth?
Determining your net worth is of utmost importance. But you have to be careful with this. You can’t mention things that are under debt or the things you have rented. Your net worth is made of things that are just yours. If you do owe a debt then deduct that from the list. For most people, determining their true net worth can be an eye opening experience. If that happens, then it can give you the boost to change your life for the better.
7. Determine How Much You Are Spending
Include utility bills, grocery bills, entertainment expense and just about everything else in this list. Though you can make a weekly chart of your expenditure, it might be better if you make a monthly chart. This will enable you to set a broader and well defined budget. Again, don’t leave anything out no matter how minute it might seem.
8. When Creating the Actual Budget, Be Realistic
You can’t add things like “will survive on butter toast from now on until the goal is reached” in the budget. Don’t over reach. Think sensibly, not radically. The point of creating a budget is to live a better life, not to alter it all together. You can still enjoy all the things you enjoyed before, but in moderation.
9. Seek Advice
You can talk to your family and friends about creating a budget. You can inquire if someone in your group created a budget, what steps they took and how it worked out for them. You can include all the positive points you come across and try to avoid the negative ones.
10. Don’t Panic
Now is the moment of truth. Once you create the budget, you need to stick with it and follow it through till you reach your goal. A budget might force you to change your life style, but you have to remember that all of this is going to end in something positive. Ask your family and friends to support you if they think you are faltering at some point.
Source: Project eve
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