How to Budget
- Set Goals – One of the most important steps in creating a budget is to write down both personal and financial goals. Personal goals could include getting marrieds or getting a masters degree. Financial goals could include buying a new home or early retirement. By articulating your goals and estimating the cost, you are more likely to take concrete steps toward achieving them.
- Track Spending – Without understanding where your money is going it will be impossible to know if you are saving enough money to meet monthly expenses or leave enough to achieve your goals. There are many ways to track spending but why do it manually when you can automate this time consuming task? Most banks include spending reports with online banking and is a great way to instantly see where you are spending your money. Other ways to track spending include Mint.com which allows you to create budgets as well as link all of your financial accounts.
- Create Budget – Create categories based on your spending analysis and goals that you have set for yourself. This step involves prioritizing and negotiating your spending with your spouse and can be difficult if you don't share the same goals. Setup your budget with a free app from Mint.com and watch your progress toward your savings goals.
- Monitor Progress – Like any good plan you will need to monitor and adjust when necessary to stay on track. If you find the amount you budgeted for a category is insufficient then you will need to take money from another category that has a surplus. One of the biggest reasons people are not successful with their budget is they fail to follow up to see how they are doing with staying within budget. Today's budgeting apps and software like Quicken make monitoring your budget easy, and spending is updated almost instantaneously so you know exactly where you stand financially.
Creating a budget is the easy part, following it can be a challenge at times however, if you create a realistic budget you will have a much better chance of success with your spending and savings goals.