Money doesn’t grow on trees and it doesn’t stick around forever. That is why it is important to work out a budget for your money, which includes budgeting some into a savings account for the future. A budget is basically just a plan for your money, an itemized summary of what income you have coming in and what expenses you have going out.
Budgeting will help to discover where you are losing money so that you can make a plan to change your spending habits. While a budget is good for everyone that has income and expenses, it’s especially useful if you are working toward any specific financial goals, such as moving, changing careers or taking a vacation.
Looking at Expenses
Start out by looking at what expenses you have going out. Do this even before you determine your total monthly income. This means utility bills, groceries, household items, insurance payments, gas in vehicles and anything else that you spend money on.
How much are you spending on frivolous items, like video games and entertainment. While it’s important to have fun, this type of spending shouldn’t consume all of your income, or affect your ability to pay your other bills.
Income can be money from a job, a hobby or even from selling things at a yard sale, when it comes to determining the money you have for a household budget. Is your list of expenses larger than your income? If so, you have a problem, which is exactly why a budget is important. Even if your income is higher, if it’s not that much higher you aren’t leaving yourself room for emergency money.
It’s pretty easy to recalculate a budget if you change jobs or find that your aren’t living in your means. Take a look at your list and find out what you can cut out of your expenses.
If you find you need to cut your spending, start out with frivolous purchases. Cut back on entertainment purchases and eating out. Start bargain shopping or coupon clipping. There are many ways to cut back on spending, you just have to be willing to take some time and put the work in to make them work for you.
When it comes to income tax time, you can add a little extra money to your refund for your budget by donating items you no longer need and getting a donation slip. Every added little bit to you budget is more money for your pocket or your savings account.
How you pay your bills is also important. Paying bills with credit cards is just adding to your debt. Only use credit cards for emergencies and only if you can pay the money off in a timely manner. Instead, purchase laser checks that can protect you from fraud or pay online with a debit card.