7 Tips To Setting Up Budget
Maybe it seems like such an overwhelming task that you don't even want to start thinking about it. Maybe you don't actually know where to start. Maybe you think that it will require hours and hours to do or it crush your head, whatever your reason, now is the time to start!
Step 1: How to Start ?
There are 2 essential things that you need to know when preparing a budget is-income and expenses.
Start a survey of the previous 3 months is usually good enough. Start by assembling part of a check or receipt retained as a record, dividend receipts, etc., to determine your income.
Next assemble 2 to 3 months worth of expenses. Get all of your bills together, your checkbook register, receipts, etc.
Step 2: Determine the Time Frame
Decide if you want to budget by the paycheck, weekly, monthly, quarterly, etc. How often you get paid may directly influence this decision. Most people just budget by the month (very good practice to keep out of debt). Remember that you may have some expenses that happen quarterly, semi-annually, or even annually (insurance,registration etc). You'll need to plan accordingly (see Step 5).
Step 3: Choose a Tracking Method
Choose a good old pencil and paper and make your own spreadsheet. Do whatever will be easiest for you to maintain. Quicken and MS Money are also good tools if you are pretty computer literate. You can also set up a spreadsheet program.
Whether it's daily or weekly, or just every few days, you need sit down and enter your expenses into your tracking method. If you put it off too long it will become too overwhelming and you'll give up.
Devoting just a few minutes a day is a lot better than three hours at the end of the month! Keeping close track of your expenses will also help you to stay in line with your budget. You'll be more aware of your money and more careful not to spend what you don't have.
Remember to collect receipts for everything, especially things you buy with cash. This will make tracking a lot easier. If a receipt has purchases that fall into more than one category, divide them up accordingly.
Step 4: Establish Categories
Select categories that fit your needs. General categories might include: auto, clothing, food, house, insurance, medical, utilities etc. Specific categories -- usually best as sub categories -- could include: food-groceries, takeout, dining out; auto-insurance, fuel, maintenance etc. Add or remove categories or sub categories, as per your requirements, later.
Step 5: Establish Spending Amounts
Keep watch, review income and expenses that you gathered. Put the expenses into the Expenses-Categories you have established so it is easy to watch and review your spending's. Total them and compare them to your income. How have you been doing? If you're over spending, determine where you can cut and as early as you find and implements cut steps you will far away from debt.
Establish new budget amounts for the time period you have chosen based on past expenses or experience. Remember also to budget for quarterly, semi-annual, or annual expenses. (Example: you pay your insurance every 6 months; divide that payment by 6 and budget that amount every month; put it aside where it won't be spent!)
Try to be flexible in your budgeting. Budgeting every last penny you earn may not be the best course because there are always unpredictable expenses that pop up. Be sure to budget some savings, even if all you can save is $1 a week. It's great to get into the habit of paying yourself first.
Step 6: Track Your Income And Expenses
Whether it's daily or weekly, or just every few days, you need sit down and enter your expenses into your tracking method. Devoting just a few minutes a day is a lot better than 3 hours at the end of the month! Keeping close track of your expenses will also help you to stay in tune with your budget. You'll be more aware of your money and more careful not to spend what you don't have.
Remember to collect receipts for everything, especially things you buy with cash. This will make tracking a lot easier. If you didn't ask or get receipt for small or certain purchases, note down theses expenses in spreadsheet as soon as possible.
Step 7: Review the Budget Often
Review your budget periodically with your expenses. See what's working and what isn't. Rework the numbers as necessary. If you are married, you may have one or two incomes in your household, both people should know where the money is going, regardless of who is earning it.
Finally, make it a goal to live within your budget. Successful people do it so You can too!