How to Create and Use a Budget

Even if you’re living comfortably at the moment and the economy is good, it’s always a good idea to create and use a budget to manage your money.

Budgeting – it’s a word that makes some people cringe. Some of us think that budgeting signals the end of carefree spending or fun in general, but nothing could be further from the truth.

Even tight budgets allow room for having fun and a few extravagancies now and then.

The key to budget planning is to be realistic about what you’re spending and saving. If you know you really spend $40 on lunches each week, say so. Don’t cover up the fact by underestimating the amount of money you’re spending on things, it only hurts the balance of a proper budget.

Remember, you can always change the amounts later, cutting back as necessary to make the overall budget work for you. The first step, however, is to get it all down on paper, as it is today. This way you see what you’re spending now, and what adjustments you can make for the future.

You Might Be Really Surprised

Once you’ve created an honest budget, diligently tracked your expenses each month and have it written down, you might be shocked at how much you’re paying out, in part and in whole.

It’s not just bills, you see, but the little things like coffee in the morning, lunches and dinners out, and small purchases that add up.

Start by keeping track of every penny you spend for a whole month. Capture everything down to the last detail, as much as possible. Save all your receipts, then write them down in a journal. At the end of the month you’ll have an accurate picture of your living expenses for 30 days.

How to Lower Your Costs

Once you understand where you’re money’s going each month, you’ll probably want to start looking for ways to spend less.

How you spend your income will determine how you can make personal budget cuts for a better financial picture. Each case will be different, and different circumstances and strategies will apply to each person.

Use these suggestions to decrease your monthly expenses on common items:

• Turn down your thermostat by a few degrees to save on gas and electricity.
• Bring lunches and coffee from home instead of going out for them during the day.
• Change your Internet, cable TV, or cell phone plan to something less expensive and more practical.
• Make some quick cash by having a yard sale to get rid of unwanted items.
• Sell your second car and use public transportation or a carpool to get to work.
• Look for sale items at the grocery store and stock up on things you use most.

These are just a few suggestions to make some small adjustments to your monthly budget. The point is, you’ll quickly learn that you don’t need the newest car or brand-name clothing to live comfortably after you create and use a monthly budget.

You’ll also discover that there are things you want, and then there are things you need. Once you understand the difference, you’ll be encouraged to make more budget-friendly decisions.

Is it worth the extra financial burden to live with things that weigh you down? You’ll likely decide that living more frugally gives you better quality of life and the freedom to do more things later on.

Budgeting shouldn’t be a depressing and unpleasant experience. When you do it right, you’ll have a more accurate picture of what you’re spending, which then allows you to make changes that will benefit your financial goals in the future.