How To Budget Money
in Three Proven Steps
Learning how to budget money is an incredible life skill worth mastering if you have a desire for the long term stability of your money. Do you get really nervous and start sweating when you are faced with the task of creating a household budget?
Just like the title of this website, it really is easy and fruitful once you get the hang of it. It does not have to be time consuming or difficult and I pride myself on helping you
make the complicated simple. Creating a budget that is realistic and one you will stick to will ultimately determine your financial stress level and success or failure. Yes, it is THAT important.
It is not necessary to invest in any software but eventually it will come in handy to be able to view all the fancy reports and graphs. When I work my financial coaching clients teaching them how to budget money, they must work a pencil and paper system for six months before considering going electronic. You must internalize your spending habits and create the self discipline necessary for lifetime success.
Here are three steps to help you develop a successful household budget:
1. First, determine how much income you have from all sources. For those of you on straight commission or fluctuating hours this can be a bit challenging. However, you can figure out a typical average and then use that. Simply take that last six months of income and divide by six. While not an exact science, it is a start and that is what you need -- to start.
2. Next, figure out your monthly expenses. This will include the typical day to day stuff as well as those periodic payments for insurance, gifts, etc. Again, figure out a yearly average so you will know how much you need to save each month to be ready when the spending actually happens.
Do not overlook expenses by going through your checkbook and credit card statements. This is a great way to discover those things you pay for regularly. Now, add up your total expenses.
3. For the last step of how to budget money, compare expenses with income. They should match exactly. If you have extra money, add it to savings or extra debt payments. If the expenses are more than income, then, uh, there is a BIG problem. Having a negative number, means your spending is outpacing your income and you need to make drastic changes ... and fast. Eventually, that overspending will get so out of control that you will be devastated financially.
If you are in this situation right now, some financial coaching will help you get back on solid financial footing. You must make spending cuts so your income and expenses balance (meaning the two equal).
Learning how to budget money using these three basic steps is an incredible life skill that will help you to achieve financial freedom. What question do YOU have about budgeting? Ask it below:
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