However for the rest of us, making, and especially adhering to a budget is essential to ensure that our money gets used the way we need it to. Perhaps you are in the best situation possible financially, you have great income you pay all your bills on time each month. Nevertheless you may find that you are spending more than you wish on items that may seem like necessities but are really luxuries.
The one mistake I've seen beginning budgeters make is becoming financial party poopers. You have to keep in mind that you do not want to cut out ALL the fun, you have to make room for entertainment and splurges or your plan is doomed to fail.
Remember its like a financial diet, moderation is the key. If you like to eat out everyday of the week, it doesn't have to stop. You can still eat out but perhaps just not every day of the week. Here are 10 steps to budgeting.
1. Budgets are a like flies
Nobody likes them around and we all find ways to get rid of them when they show up. Unfortunately they are essential to our financial ecosystem.
2. The budgeting two step
You can dance around this issue for months or even years you are going to need a budget. The key is to identify how you're spending money now.
- Evaluate your current spending and set goals that take into account your long-term financial objectives.
- Track your spending to make sure it stays within those guidelines.
3. Don't try to be a whiz kid
If you use a personal-finance program such as Quicken or Microsoft Money, the built-in budget-making tools can create your budget for you.
4. Driving Mrs. Crazy
Some people find that once all the info is on their computer they become money control freaks. Once you determine which categories of spending can and should be cut (or expanded), concentrate on those categories and worry less about other aspects of your spending.
5. Don't call the plumber
If money leaks from the ATM machine without apparent explanation, it's time to keep better records. In general, if you find yourself returning to the ATM more than once a week or so, you need to examine where that cash is going.
6. Watch the spending limits
Spending limits should be observed just like speed limits.When they are not adhered to then it can be dangerous. Surveys show that many households with total income of $50,000 or less are spending more than they bring in. This doesn't make you shoe-in for bankruptcy, but it's definitely a sign you need to make some serious spending cuts.
7. Beware of luxuries dressed up as necessities.
If your income doesn't cover your costs, then some of your spending is probably for luxuries - even if you've been considering them to be filling a real need.
8. Tithe yourself.
Most people tithe to churches or other charitable organizations. In addition the only way you are ever going to see a significant amount of money saved up is to tithe to yourself. That means taking 10% off the front end of your income and placing it in a savings account. Also I suggest that you have an account that doesn't have an ATM or debit card attached to it.
9. Don't count your chickens before they hatch.
When projecting the amount of money you can live on, don't include dollars that you can't be sure you'll receive, such as year-end bonuses, tax refunds or investment gains.
10. Save until you can't save anymore
As your annual income climbs from raises, promotions and smart investing, don't start spending for luxuries until you're sure that you're staying ahead of inflation. It's better to use those income increases as an excuse to save more.
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