5 Steps for Creating a Successful Budget
Creating a successful budget is important to make sure you have enough money for everything you need in life and to keep you from running into debt. It also takes the worry out of your personal finances. Visualizing your money helps you find ways to reduce spending or identify extra money that you may not have noticed before in your income. Follow these 5 steps to create a successful budget and gain control of your finances.
- Write down all of your goals and the reasons you want to create a budget. This could be because you notice you are overspending or you may be wanting to increase your finances for a major purchase such as a home or car. Identifying why you are budgeting is essential to the process because it can help encourage you to stay on track on the days that you don’t feel so disciplined. It also helps you determine a timeline for your expenses. If your goal is to purchase a house in the next 5 years, you may need to be more aggressive with your savings or decreasing your debt to qualify. Each situation is unique but having defined goals adds perspective to your overall plan.
- Choose a budgeting method that makes the most sense for your financial lifestyle. There are a ton of ways to budget but if you choose the wrong option you could up being discouraged later down the line. Think realistically about your goals and how much income you have. If you are certain that you won’t have money leftover at the end of each month or you are barely keeping up with your expenses, choose a more low maintenance style budget.
- Separate your expenses and bills into two piles. One should be fixed expenses and the other should be variable expenses. Fixed expenses are non-negotiable bills such as utilities, rent, mortgage and other essentials that must be paid at once time each month. Variable expenses can range from time to time and include groceries, dining out, entertainment, monthly subscriptions and more. Enter your fixed expenses into your budget first and assess where you stand financially without the variables. Then, one-by-one, incorporate your variable expenses into your monthly budget starting the top priority first. As you dwindle down the list, you’ll see your monthly net balance dwindling. To leave more room in your budget, consider cutting the lowest priority variable expenses to free up some money to push into your savings.
- Build up your savings into different categories. Allocate money to irregular expenses such as car repairs, emergency room visits, and other surprises that can occur. This is a must to avoid going in the negative when unexpected bills arrive. To help with this, it’s probably wise to automate your savings.
- Track your progress and review your budget each month to see where you can refine and it and increase your savings. This also serves as motivation to see how far you’ve come with your budgeting.
If you are ready to take the next step to simplify your budget, contact us to get started today.