Why is it that the word "Budget" seems to create such fear in so many people? It's as if using one will take all the fun out of life because it's some sort of draconian money management scheme that ties up all your money. Fortunately setting up a personal budget is not that complicated and if done correctly it can free up money to the point that it looks like you are getting a raise.
If you've thought about making a household budget but have reservations or just haven't taken the plunge there is no better time then now. The first thing to do is understand that it isn't all that complicated. All a budget is is a listing of expenses and income. It really is that simple. You don't need the latest book, spreadsheet, or budgeting software to get started all you need is a notebook and pencil.
Once you have you pencil and paper ready go back through all your bills for the past three months. It is also helpful to have your checkbook register handy because on your sheet of paper you are going to write down by expense how much you spent. Add up each expense and then divide by 3, which is the amount of months you have gone back. This will give you a monthly average for each expense. Add up all the expenses and write this down at the bottom of the page.
Now on a separate piece of paper write down all your monthly income. Include income from regular jobs, part time jobs, investment income, or any other income you might have coming in each month. Add that up and write it down at the bottom of the page.
Now's the time when most people look at the income and the expenses and a huge gasp of disbelief leaves their lips because they are spending more money then they are making. If this is you look at that number closely and then use that budget of what you have been spending to create a budget for the next month of what you will be spending. This is what a personal budget is, a spending plan that tells your money what to do and where to go.
Look back over your expenses and start finding things you've been spending money on that just doesn't make sense. How often do you eat out? Trips to Starbucks? This is the time to stop the bleeding and recoup all that money that just seems to disappear every month because you don't want to wake up one day and wonder why you don't have any money for the future.
Here's the crux of the budgeting process. You have a snapshot of where your money has been going based on the expenses you have written down. Now instead of looking at the past let's translate these expenses to the upcoming month. If you write down all your expenses for the upcoming month and allocate funds for these upcoming expenses you have won half the battle. This ensures that your bills are paid and every dollar you will have coming in has already been told what to do before the month even begins.
One last word about setting up a personal budget. Be patient, the first couple of months you do it it will not work out quite as you had planned. It will take some tweaking to get the process down but by the third month you should start to get the hang of it and before long you will have control of your financial future.
If you seriously want to take back control of your money you need to build a Personal Budget. To learn more about creating a budget please visit the website Household Budgets by clicking here.
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