It’s normal for people to get stressed about financial matters. Stress is one of the great killers that can shorten your life and make you physically ill without you even realizing that stress is the cause. Something that they used to teach in school in the old days, making a household budget, unfortunately does not seem to be taught anymore we believe that this is a tragedy a lot of pain and emotional anguish could be avoided by just knowing how to make a budget and sticking to it. We may not have a lot of money but we seldom get stressed due to financial matters. What’s our secret?
Start with the basics. The first thing you need to do is learn how to make a monthly budget. In its most simplest form, a budget is simply a sheet of paper that tells you how much money you have coming in and how much money you have going out. If you have more money going out than coming in, you have a problem, and this is where all the stress comes from. Once you have it all down on paper in black and white, you can start to look at how you can adjust it to take it to where it needs to be, and where it needs to be is with the more money coming in then going out.
Your monthly budget serves as your guide/plan for spending money. If you have a budget, it’s easier to allocate your hard-earned money on necessities. This plan allows you to monitor spending and prevent excessive expenses. It is the key to properly manage your funds don’t be turned off by the word budget, it’s not what is going to cause your problems, on the contrary, correct budgeting will help you make the most out of your earnings. If you don’t create a budget, then the more chance you will end up overspending every month.
This is about as simple as it gets, you put down every penny that you make. All income that comes in, such as income from your job, or gifts that your family might give you to help you through the month, or even that extra bit of cash you made mowing the neighbors lawn. You need to be honest with yourself, and put down everything. There is no thinking thoughts such as “I made a little bit of extra money, so I can save that and spend it on something fun.” Your budget has to be honest, so you know exactly where you stand. There are no rose-colored glasses here.
This is the scary one. You have to write down absolutely everything you spend. The first things you write down are the essentials. The essentials are those things that you really don’t have a choice on, such as rent, utilities, loans, and insurance. Once you have the basics down, then you can start writing down all the other things that you spend. We have counseled people more than once that were complaining that they couldn’t make ends meet, and when we wrote out a budget we found out they were eating out a couple of times a week. For some reason, people just don’t seem to see and connect the fact that they’re spending money with not having any in. Just by removing that eating out, and suddenly they had a surplus of money.
These are the ones that you need to watch carefully. As we mentioned before they can be things such as eating out, or going through that fast food place because you were in a hurry, buying that coffee at Starbucks, or even buying that new shirt because it looked awesome. We would advise you not to spend anything that is not essential until you have finished your budget. Once you have got everything down on your budget, you will know what you have left that you can spend on nonessential things. And when you have that number, remember to never spend more than that number that you have assigned yourself for fun.
Although it does not sound like much fun, once you have created your budget, you need to go through it line by line and see what you can change or fix. It might be something as large as moving to another apartment that cost less, or something as small as installing power saving lights to get the electricity down. Electricity is a good want to look at, as when you use too much, most electric companies have tiered pricing. This means that if you can get it below a certain point, the bill can drop quite drastically. The most important thing though, is to analyze everything and understand what you are spending and why. We believe that it will be quite eye-opening for you.
There are many apps that can go on your smartphone that can help you track your daily expenses. You can carry a small notebook around with you as well if you want to go old school. But what’s important is for a while that you track all your expenses. If you buy a pack of gum, put it down in the expenses. Your friends might start to think you’re becoming stingy or cheap, but with the relief of not constantly being out of money, you won’t care. In fact, it’s a high probability that your friends might ask you how you do it.
Savings and emergencies
You also need to make a line item for savings. Never let yourself be fooled into thinking that you can spend all the money that is coming in. We all know, there are always emergencies and extra expenses you are not expecting. When we owned our own house, we used to add line items to the budget for such things as the water heater and the roof. You don’t have to replace your roof, when you own your own house, for many years. But the roof is an extremely expensive thing to replace. So it’s a good idea to break up that price into monthly installments ahead of time, so when the time comes that it needs to be done you will be pleasantly surprised that you have enough in the bank. You can do this for anything that has a lifetime to it. You know your car is going to need repairs, so put a small amount into car repairs so that when the time comes you already have it budgeted. Emergencies happen, so prepare for them. And if you’re good enough with your budget, you can also save for other things that are a lot more fun and pleasant, such as a vacation.
We can’t emphasize how important keeping a budget is. Even if you only keep the budget for six months, until you get a good feel for what your spending, what is coming in and going out, it is well worth it. We have learned however, that even if we don’t keep a budget going for a while, it is still a good idea to occasionally started up again. This will remind you of what you already know and were perhaps not following. If you look at all those people that have more money than you think they should, and are working the same kind of job is you, the probable differences they have a budget and there watching what they spend. People may think you’re cheap, but you can laugh at them all the way to the bank. Make a budget.