Budgeting: A Way to Achieve Financial Success
In this economic recession, saving money and cutting back on expenses has become a focus of financial planning. Budgeting, though, has always held the key to sound financial success.Most of the time, people do not realize how much they are spending on "frivolous" things such as a daily cup of coffee or getting take out for lunch instead of brown bagging it. Budgeting provides the shock value necessary to make someone aware of the amount they actual spend on these items, and want to change those behaviors. Not only does budgeting make you take account of your income and expenses, but it helps develop new habits, forces you to cut back on expenses in order to save money, and is a blueprint to achieving your financial goals.
When starting a budget, there are a few simple steps to get underway.
- Start by keeping account of your income. Only track income that you can count on. For example, include income from your job but do not include income from a yard sale.
- List all of your expenses. Include everything. It may help to bulk some expenses together, such as grouping eating out, going to the movies, or theater under an entertainment category.
- If you do not know all of your expenses, take a week or two to write down everything that you spend. This includes gas, parking meters, coffee, bills, etc. I would suggest doing this for a month in order to really get to know your spending. And don't just keep track of debit and credit expenses, write down what you spend your cash on (in this case, paper money).
- When you have all your expenses and income tracked, lay them out in a spreadsheet or other structured format. You want to apply your tracked expenses for every month of the year to create an annual budget. Use this time to look and see where you can cut back on your spending.
- Make sure your income covers your expenses. If it does not, you want to make sure that you can cover the additional expenses.
Helping to Ease Anxiety
It may seem difficult in the beginning, but budgeting helps relieve the stresses of everyday money management. Since you now know where all your money is coming from and going, you no longer need to worry about making ends meet. You know where you are excessively spending and where you can cut back. Budgeting allows you comfort in knowing exactly what is occurring with your money.