It’s so tempting to bury your head in the sand and ignore your finances. Especially if you aren’t financially savvy or you feel like you don’t know what you’re doing when it comes to creating and managing a budget. I’m here to tell you that it does not have to be scary. As a matter of fact, creating a budget can be one of the most satisfying things you will ever do with your money. Below I discuss the steps to building and maintaining your monthly finances, without creating turmoil.
It is essential to track your spending to see where your money is going in order to create some awareness of your spending habits. To help keep track of how you spend your money, I suggest you develop categories such as:
- Housing (mortgage/rent)
- Automobile expense – car payment, gas, repairs
- Insurance premiums
- Medical expenses
There are several ways to track your spending, and you will need to find the one that works best for your situation and comfort level.
Create a budget
Creating a budget can be very liberating – it’s always best to have a clear picture of how much you bring in and where it goes. It also helps to set a clear understanding of your goals. Are you looking to save money for a particular project or do you need to whittle down your debt? In either case, if you don’t have a clear view of where you’re spending is happening, you may be left with more month than money.
Setting up a budget can be as intricate as you want or need it to be. There are several mindsets around creating budgets, like the zero-based budget or the retirement budget. Whatever your goals are, they should be reflected in the budget you create.
Once you have set your goals and created your budget, the next decision to make is how you will keep track of it all? There are a few of ways to record your expenses, and you’ll need to find the one you feel most comfortable using.
One option is to install Quicken on your computer. You will then be able to download your bank accounts and credit card transactions. Quicken allows you to put each transaction into a category and create a report at the end of the month to see how much came in and how it was spent.
Another option is to use a spreadsheet, like Excel. Here you can create the categories and hand enter all your spending. Having to enter everything manually will be more time consuming, but if it is your preference, then it is more than sufficient.
Lastly, if you don’t have a computer, or prefer pencil to paper, then purchase an accounting ledger. This allows you to enter your income and spending by hand, create your own categories and make your records as personalized as you want them to be.
Of course, if you don’t have the time or desire to create a budget, then these suggestions may not work for you. In that case, you may want to enlist the services of a daily money manager who can help keep your finances on track for you.