Budget? But where do I begin?
Have no fear. It really isn't that hard. The hardest part is to take this first step. I want to disclose up front that I have no PHD in finance. I'm not claiming to be a know-it-all. I just want to share some fundamentals that have helped me through the years. Perhaps if this is too elementary for you, it may be a nice reminder for what you already know or perhaps give you new ideas. If this post seems too simple, I hope that you will be patient in knowing I have even more to share in the future. Oh, I'm going to open up and dissect your budgets and hopefully enhance them with some of my personal saving secrets. But first, for our new comers or those that already know how to budget that might need a fresh start, it's time to take a look into our past.....
Step 1 - Gather your past records.
The first thing I encourage everyone to do in order to budget for your future is take a look at your past. Start by pulling your records for at least the last three months. Gather everything you can including bank account statements, credit card statements, and any cash payments for which you can remember that you may not have kept an actual paper receipt (baby sitters fees, lunch at McDonalds last week, etc.)
Step 2 - It's time to get real
Once you have these items in front of you its time to take a look at where your money has been going. This may take some time. Be thorough and don't cheat. Prepare yourself for what you are about to find and be as honest as you can. I'm serious. Be really honest no matter how surprised or embarrassed you are at what you have been spending and where. The only way to get back in control is to be be honest about where you may have lost control, then accept it, and now make the necessary changes to move forward. Remember, no one is perfect and we all have our weaknesses. Recognize your flaws as a part of who you are and work on them daily to continue to grow into the better and unique individual you are.
Step 3 - Income and Expenses
Your records will show you where you money is coming in and where you money is going out. Your ultimate goal is make sure your outbound money is ALWAYS less than the inbound. Sounds pretty elementary right? Take a quick glance at yours. Are you spending more than you are saving? If you are saving more than you are spending, can you save more? Lets take a closer look at exactly where you are earning and spending.
Step 4 - Building categories for your income and expenses.
Keep in mind everyone's lifestyles are different. A 17 year old will not have the same income or expenses as a 45 year old married individual with three children. That being said, mine may be different than yours. I will do my best to include as many examples as possible, but only you know the details of where your money is going now or may go in the future. Use my sample picture below as a guide to get you started on categories for yourself. Take all, and I mean ALL, of your income and expenses you see in the records you have gathered in front of you and assign each one to a category. Keep a running total as you go for each category.
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Now add up your total income. Add up your total expenses. Which one is greater?
Congratulations - No matter how proud or ashamed you are at how much money you are spending or saving in each category, you have taken the first step toward regaining control of your money.
What you have in front of you is your reality for the past several months. Now it's time to look forward to the future months and decide where you want to be in each of these categories.
We have looked back. Next, we will be looking forward.
"A penny saved is a penny earned." - Benjamin Franklin
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