How to gain control of your money.
It’s never too soon to put yourself in control of your money and stop letting it control you. A budget will give you financial peace of mind and, if you’re struggling to make ends meet after a job loss, it can help you stretch the income you have.
Here are some strategies to help you start building a budget now.
Dare to dream.
Write down the financial goals you want to achieve in the next few years and the ones you want to accomplish for the long term. Use your imagination. Even if you’ve made money mistakes in the past, you can change things in the future. Visualizing new goals is the first step to making them happen. Remember: Don’t get hung up on creating a list you can set in stone. You can always update it.
Know your take-home pay.
Many people overestimate their purchasing power. They look at their total salary as the money available to spend. You should base your spending plan on your net income. That’s the cash you bring home after your employer deducts taxes, social security, flexible spending account allocations, and 401(k) deductions.
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Spreadsheet to Consolidate Your Monthly Spending
Map it out.
Create a simple spreadsheet showing your net income for the month and where the money will go. Divide your expenses into fixed expenses (those that stay the same from month to month, such as a mortgage payment or cable television bill) and variable ones (those that may change, such as fuel bills or entertainment). Base the amounts for each category on what you spend now. There are many budgeting software tools available.
Do some detective work.
Having trouble creating your budget because you don’t know how much you spend on groceries and other variable purchases? There’s a solution that takes just minutes a week: Track your monthly out-of-pocket spending by using a spending journal. Simply write down every purchase in a small pad each day. You can also save all of your receipts and tally them by category at the end of each week. If you use your debit card for most purchases, you can track your spending through your online banking account.
Customize it.
The beauty of creating a monthly budget is that you can tailor it to your personal needs. Once you’ve figured out how much to set aside for your fixed expenses, divide what is left among the items where you have more room to maneuver, like groceries and entertainment. There’s no “right” amount to spend on each one, so if you love going to football games but rarely dine out, build your budget accordingly.
Managing Credit Tip #5
Want to avoid paying interest on purchases? If your credit card has a grace period on purchases, and if your balance consists of only purchases, take advantage by paying your balance in full every month.
How to Budget
Create a budget in 4 simple steps.
- Track your daily spending. A pen and spending journal, which can be a small note pad, are all it takes.
- Calculate your income and expenses a month ahead of time. Check in with your partner before finalizing the list.
- Find ways to decrease spending. Adopt just one new way of trimming expenses each week and you’ll find your overhead shrinking fast.
- Uncover ways to increase your income. Use a talent–writing, home repair, teaching a musical instrument–to start a small side business for extra income. A side benefit: you can take the business full-time if you ever lose your job.
Take stock.
Keep track of your spending each month via your spreadsheet to see how you’re doing. If you’re exceeding your budget in some categories consistently, cut back elsewhere so you don’t fall behind.
What's next? Becoming a bargain hunter
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