How To Make A Budget
How to Make a Budget – 5 Easy Steps
I overheard an acquaintance saying that she had no clue as to how to make a budget, and if she did, it wouldn’t work anyway. Knowing that she was incorrect, I was ready to put my two cents in, until I thought back to the first time I tried to create a budget .
I can still recall the first one that I tackled. I was really into it and bought a calculator and various office supplies to get it on down on paper, I was determined to create a budget that would work, and set it up with over 35 different income and expense categories. All that week, I saved my receipts for every little thing that I bought and at night I entered them in the appropriate categories.
After a couple of weeks of that very complex type of budgeting, I became frustrated and tossed it in the trash. I was spending a couple of hours every night working on the budget, and still didn’t have a handle on it.
Could this lady be correct in saying that a budget doesn’t work? Well, I surmised that perhaps she was partially correct; a budget won’t work unless you keep it simple and set a goal before you begin. That was the problem with my first one, it was too complex and I had no goal to achieve.
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Here are some ways on how to make a budget, and one that will work for you.
- Before you begin, establish a goal that you want to achieve
You need something to shoot for. For you, it might be a new car, a boat, a nice vacation, or perhaps an emergency fund for the future. When I created my budget, I wanted to manage my money and save a little, but those were not the type of goals to set. Plus, those 35 budget categories made it too complex and detailed.
- The easiest way to learn how to make a budget is not with a pencil and paper.
There are many software programs on the market today that will help you create a budget without getting all stressed out. I tried just about all of them, both Free and paid, and finally settled on You Need a Budget. Wow, did it ever take the stress out of creating a budget! The program is very intuitive and will ask you questions as to your lifestyle, goals, etc Help is only a click away, plus the software developer has classes to assist you in this process, and they are Free of charge.
- Keep it simple
Don’t do as I did with my first budget, or you’ll probably toss it away just as I did. At the beginning, there is no need to have a separate expense category for every little type of purchase. What we mean here, is don’t set up an account for hand soap, another for shampoo, etc. Select one account to include all of those types of purchases.
- Watch the credit card spending
One of the goals of any budget should be to reduce or eliminate debt. Generally, we mean credit cards and other high interest rate personal loans. If you have a mortgage on your home, it usually will be at a much lower rate of interest than other personal debt. Credit cards can be a help in creating a budget because of the listing of all purchases that you need for your budget. Just be sure that when that credit card bill comes in, you have the cash to pay the entire balance.
- The end result
There is no “one size fits all” type of budget. We all have different needs, lifestyles, income levels, and goals that we want to achieve. When you’re thinking about how to make a budget, you need to keep this in mind.
Don’t create a budget that is highly restrictive because it will most certainly fail. It needs to be a workable budget that you will able to live within your means, and once in a while, reward yourself with a night out with friends or some other item or activity that you enjoy.
It’s not that difficult for any of us to learn how to make a budget and take control of our spending, as long as we set goals that we can work towards.