how to budget 101
Budget. The dreaded “B” word brings all sorts of negative thoughts to mind. But a budget is just a plan for your money. Whether you’re trying to get out of debt or get a better handle on your spending habits, the first thing to do is create a budget. It doesn’t matter if you’re single or if you’re 70 years old with 16 grandchildren, you need a budget. By giving every dollar a name, you’re telling your money where to go, instead of wondering where it went.
If you’re doing a budget for the first time, here are a few tips to keep in mind:
- Be patient. It may take several months to create a budget that works. Don’t give up. Simply keep trying and eventually you’ll find what works for you.
- Spend every penny. While creating a budget, you need to account for every cent. It may seem tedious, but you must know where your money is going in order to create a budget that works.
- Overfund your grocery category. Most people don’t assign enough cash to their grocery fund. As a result, they have a difficult time sticking to the amount they assigned. Make sure you put plenty of cash in your grocery envelope.
- Do the budget together. If you’re married, your spouse needs to do the budget with you. If you’re single, ask someone to be your accountability partner and show him or her your budget each month. Learn how to communicate with your spouse about money.
- Do it! In order to make the budget work, you need to actually do it. It’s a pain the first few times, but you’ll be thankful you did it in the long run.
Remember, budget your spending on paper, on purpose, before the month begins. Too many people think a budget stops all of the fun. But that’s not true. They’ll have more fun down the road after they know how much money is coming in and going out. In fact, a lot of people find even more money in their account when they create a realistic budget and stick with it. How fun is that?
When you develop a plan for your money by using a budget, you are changing your future.