When many of us hear or see the word “budget,” we tend to have a visceral reaction to it. The fact is that we all know we need to have a budget, but people are often afraid of what that means in terms of their lifestyle. Americans perceive budgeting as a loss of fun. No more nights out on the town, shopping at the mall, treating yourself to a delicious dinner at a new restaurant, or trips to the theater. However, budgets were not invented to make everyone’s lives miserable. The purpose of a budget is to essentially manage funds going in and funds going out. Understanding this basic fact will help you get the most out of your income and even allow you to continue to have fun, but in a responsible way that will not jeopardize your financial future.
So how does one get started on balancing a budget? There are four main ways to create, track, and monitor your budget, and each method uses different techniques. Regardless of their differences, they all emphasize the importance of organization and paying attention to details.
1. Financial Software: Some software, such as Quicken, were specifically designed to help individuals balance their budgets. If you are not computer-savvy, however, you might want to opt for a more user-friendly option.
2. Notebook and Pen: The least expensive, oldest method out there is to simply write down all of your sources of income and expenses and, from there, get started on balancing your budget, making sure that your expenses do not exceed your income.
3. Free Online Software: Not all financial software costs. There are several web-based software programs, including Manilla and Mint.com, which will allow you to create and group your expenses into categories. This will make it easier to track your spending and see exactly where your money is going.
Creating Your Budget
Depending on your circumstances, budgeting strategies and techniques will vary. What works for a first-year college student will not apply to a retiree. That said, there are some basic steps to creating a budget, which can help you organize your finances in a sensible manner.
Here are some helpful tips on how to get started on creating a budget:
1.Set Some Goals: Begin my setting two categories of goals – your immediate goals and your long range goals. The immediate goals you set will focus on today or the near future, whereas the long range goals you set will deal with saving and spending over a span of decades. Determine which goals are necessities and which are luxuries, then prioritize them.
2.Calculate Income and Expenses: Once you figure out what your financial goals are, you can craft a plan on how to reach them. Make a list of your monthly income sources, including bonuses, and any monthly payments you have to make.
3.Analyze Your Spending: A budget is meant to ensure your expenses are not exceeding your income and, if they do, you will need to make some adjustments. This is the moment some people dread about budgeting. However, making adjustments to your spending does not mean you have to eliminate everything you enjoy. It means you will have to revisit your discretionary costs and figure out what you are willing to trim.
4.Revisit Your Budget: After you have a chance to monitor your expenses for a couple of months, you will have a greater awareness of any areas that are need of adjusting. It is possible that some of your estimates were off, or that you did not account for expenses like car repair payments or medical bills. Make the necessary adjustments and commit to following your budget. Just bear in mind that budgets are not forever and, periodically, you might have to make adjustments. Always review your finances to ensure you are making these changes whenever they are necessary.
Ultimately, remember that saving is a central part of the plan. Consider using a financial planner, or open a separate savings account and fund it until you are able to reach your goal. Keeping your savings separate will decrease the likelihood of you raiding it to purchase non-essentials.
If you are going through a difficult financial situation and are unsure if bankruptcy is the right next step for you, turn to the Lam Law Firm in Myrtle Beach for the advice you need during this time. We will fully explain the complexities of bankruptcy rules and procedures in a way that is understandable and relatable. You do not have to endure this time of uncertainty on your own.
Call us today at (843) 695-7700 to schedule a free consultation.