How to Budget Your Money Better
When marriages end and if one asked the couple how their marriage ended, it would most likely have resulted from financial arguments. One partner made more than the other, they made too little, or they too frivolously spent it. Whatever the case, people struggle with finances and it shows in every area of their lives. The incredible thing remains that money, with as much worth as we place on it, is a piece of paper - its worth is directly tied to what people believe about it, so why does it cause so much grief? It frustrates so many people because to whatever people grant power will consume them. Money possesses immense power and without the proper means to control it, it will overpower whomever it may. To gain the upper hand on the monthly budget and reap the benefits, one should determine how much they would like to save, their income, their expenses, and set rewards and goals in place.
What prevents you from making a better budget?
Saving money is a seemingly lost art in today's day and time. In a world of fast paced entertainment and the "blow and go" mentality, it remains a crucial first step in setting a budget to first set down the amount to save. Many people may opt to set up a budget and then determine an amount to save. Well, much could be said of determining the end game and then playing to the whistle. Knowing the goal in the end can inspire anyone to persevere.
When setting the amount to save toward, many factors should be kept in mind. First being calculating the difference between all expenses and all available income. If this number is zero or in the negatives, do not fret! That can be changed and worked with. When you have the number, the next step is keeping this number constant from month to month. The point in having a goal and working toward it is to continue on. While this may be a daunting task, as will be shown later, but keeping to the plan in the first few months is integral. Setting the goal and working backward can help keep things in perspective and allow you to more ably keep constant income, expenses and this savings amount.
Setting this amount will further grant you the benefit of knowing the amount of preferred spending money on expenses. This will help when you determine what expenses to cut out. Keeping to this plan will allow you to see the big picture and see that number every time you open that budget. Seeing that number grow in your savings account will inspire you to allow it to grow and not draw from it.
Many experts say that we should look at savings as paying ourselves. What is vital with this mindset is actually doing it! Ensuring that you set an amount, however much, is important as you watch that balance in the bank account grow and grow.
Next, one should what type of account to use. Saving in a traditional bank account will be nigh fruitless, but opting for an online bank account will grant you around one percent, which proves to be a hopeful prospect compared to the dismal tenth of a percent of the brick and mortar places. Also, one could use a money market account to save. While this could be more difficult and will definitely yield higher payouts, acting as a bank account, these money market accounts are not FDIC insured and could leave you vulnerable to changes in the stock market, as it is similar, but not identical, to a mutual fund. Be careful where the money is put, but put it somewhere in a place you are comfortable with.
Compiling all sources of personal revenue and income is the next best step to setting up a top-notch budget. A good budget will uniquely itemize each source and clearly label them, so they can be quickly inserted into the budget. A great program to use for this is Microsoft Excel. While it takes a bit to get used to, setting up a spreadsheet will grant you the most flexibility and identity in personalizing a budget form to fit your unique needs.
A financially fatal mistake in drafting and sticking to a budget is failing to list all sources of viable income. The goal and intent of a budget is to list all financial information, the highs and the lows, so that when the paycheck or bill comes, there will be no surprises. I am personally bad at listing all sources of income. If the odd jobs I do come early or too late, I leave them off, putting me susceptible to fluctuations in my plan. Avoid doing this! If there is something, great or small, that changes in the income entries in the budget form, record them. The goal and intent is to plan for any discrepancies in the financial plan for your household, so leaving something off will inevitably contribute.
Any income source must be recorded. If you work ten odd-jobs, then record individually each of those positions. Personally, I work two odd-jobs per month: music lessons and lawn mowing. Each of these possess their own spot in the Excel sheet. Sometimes, I do not work them, and in the cooler months, mowing someone's lawn is an obsolete prospect, so at that point, I set the entry at $0, and move on with the sheet. If my lessons fall through and cancel, I will return to my spreadsheet and enter $0 or the dollar amount congruent with the number of lessons I have taught. Stick to this plan and it eventually will become automatic.
It will then be important to list a total income. When you have a vision for the total amount of what you make from all sources, you may then have an accurate picture of your financial situation, in addition to your expenses. The trouble comes when things are not written down on paper, or on a hard drive, so that you and I may physically and accurately see what we make. Leaving things up to memory serves us wrong and the budgets we make will reflect that.
Having noted the Savings amount and the Income, now, think of the expenses. In this instance, "Saving the best for last" is a cold lie, as this is often the most depressing and is second to last in our list. Just as with the income, labelling each expenditure will enable a person to see exactly what they spend on things month, to month.
Initially, this will be hard. Putting on paper what you spend on useless junk every month will discourage you, but take heart, this will give you the opportunity to omit some expenses to render to your savings. One method I use for this is saving my receipts. When I know I will have to look at that useless scrap of paper again to record it in my budget, I think twice about purchasing something. This will also further enable you to take an honest look at what you buy. If you look at your receipts and notice you spend $182.50 on cat bow ties, you will be able to see that no person, alive or dead, has ever had any use for $182.50 worth of bow ties for their cat! When you are able to identify these superfluous expenses, you can eliminate them. My, how wonderful would an $182.50 bonus look in that savings account!
After the expenses are identified, a system must be devised to compile these expenses and effectively track them so that they can be monitored and easily change course. Without tracking these receipts, you may never find out that the five dollars you spend on coffee every morning truly adds up. Noting this daily expense can help you assess if it is truly worth the damper it puts on the monthly budget and savings amount. Labeling these expenses and religiously listing them will allow you to sooner change the habit and reduce that every day purchase to a bi-weekly or once a week splurge. Take note of these expenses lest they quickly add up and consume the budget, detracting from those ever precious savings.
Now you get to embark on the fun section! Setting goals for your work will give it direction and focus, just as working a traditional job. Setting realistic goals and those that are lofty enough to inspire hard work will help you achieve the savings number you identified in the beginning. To do this effectively, one must set big, long-term goals, and at least one short-term goal.
For instance, my long-term goal involves saving six months worth of expenses. To obtain that, I plan to save four hundred dollars a month for the next two years or so. A simple, clearly stated goal can keep the dream real and obtainable. My immediate, short-term goal includes saving up for a pair of Red-Wing Heritage boots. Since they run about three hundred dollars, I plan to save up enough for my immediate expenses, then for my birthday splurging and buying these boots. Both goals will in conjunction work together to prove the effectiveness of saving.
To set a practical, long-term goal, you must think of your total amount you can save each month. If you can only save fifty dollars a month, it would be incredibly unrealistic to aim to save one thousand dollars in a year. That is impossible. But a goal such as five hundred is completely within reach. A short term goal may be to save up for a concert you plan on attending in three months that costs seventy-five dollars. This still allows you to work toward your long term goal as well as save for the short term. Money acts like a snowball if you allow it, it will accumulate and stick together when one packs it.
It is important to note once more not to be discouraged. When times are hard, return to your goals, review them, review your budget, and the timeline to meet those goals. If there is another expense you may cut out, do so in order to meet your goals. Do not let self-discipline be the factor that prevents you from reaching your goal. Keep fighting and you will win with your budget.