Yes, making a budget is, without a doubt, the foundation to establishing
control of your finances. Putting proper budgeting techniques to use will
enable you to track all of your incoming and outgoing cash to help you
eliminate unnecessary expenses resulting in substantial savings.
Tip 1 - Budgeting Basics
Putting together a budget isn't at the top of most people's fun list.
However, going without budget will certainly not be fun if you don't know
how you're doing financially.
Once you put together and work your budget, you'll be surprised at how much
unnecessary spending you'll uncover. For instance, going out to lunch
everyday, buying that coffee in the morning, impulse shopping, etc. really
does add up.
In a nutshell, a budget will track where your money is coming and going.
It will indicate your revenue (cash coming in), expenses (cash going out),
and what you have left over (net income) after subtracting expenses from
revenues.
Tip 2 - The Budget Worksheet
I would recommend putting together your initial worksheet by hand. Some
people like to use Excel. You can also find an array of free on-line
spreadsheets through google docs (docs.google.com).
Keeping it simple and getting the worksheet done it what's important.
Many people find that taking a pencil to paper approach to constructing
the worksheet works well because they can better absorb the information. Of
course, use whatever you feel most comfortable with.
Tip 3 - The Money Flow
Here you'll list your monthly income, your monthly expenses and subtract
your expenses from income to come up with your net figure. This net figure
will tell you if you're income exceeds your expenses or vise versa.
Ideally, you'll want to have a positive net figure. Unfortunately, in
many cases, that positive cash flow number isn't as large as you would like
it to be. Or worse yet, you may be showing negative cash flow. The good
news, there is light at the end of the tunnel - adjust.
Tip 4 - Adjust
If you would like to have more money left over at the end of the month or
you're spending more than you're taking in, don't despair. You're just going
to have to make some adjustments.
Take a look at your expense items on your budget sheet. Do you see areas
that you've flagged as being wasteful spending? Perhaps you're overspending
at the department or grocery store? Maybe you can spend less on a cell phone
plan, cut back on premium TV and eliminate unnecessary expenditures.
Tip 5 - Envelope Budgeting
The beauty of this system is its simplicity. It's a very effective budgeting
tool that uses envelopes to track your monthly spending. Envelope budgeting
is a method of budgeting where you set aside cash money each month for a
specific budget item in an envelope.
What's really ideal about envelope budgeting is it forces you to live
within your means. Once you've spent the money you have for a budget
category, you cannot spend additional money for that category until you put
more money into the envelope the following month per your budget.
Another great feature of envelope budgeting - you'll know how much money
you have left to spend in a given category at any time by just simply
counting the cash in your envelope. If you have the cash, great. If not, you
hold off spending on a category until you accumulate the necessary cash.
For instance, you put $200 a month into your clothes envelope. At the
beginning of the next month (month 2), you put another $200 cash into this
envelope. Let's say at this point, you count what you have in this envelope
and its $225 (meaning you spent $175 of the $200 in month 1). You now have
$225 to spend to get you through the remainder of month 2.
If you spend less than the $225, your clothes envelope cash will continue
to accumulate. On the other hand, if you spend the entire $225, you cannot
spend additional money on clothes until you put another $200 into this
envelope at the beginning of month 3.
