By Evan Vitale
We all make resolutions for the new year: exercise more, lose weight, stop smoking, etc. However, a great personal goal you can set up and follow (starting today) is creating a simple budget and sticking to it.
Budgets are often ignored in most households. In fact, that’s how we sometimes get into trouble when it comes to savings, credit problems and not having enough money to make ends meet each month.
How can you solve this problem?
First, be aware of how much you spend each day, week and month. This means keeping track of what you spend every day, even on minor purchases such as coffee, lunch, magazine purchases, etc.
Second, create budget categories, such as:
- Food
- Clothing
- Utilities
- Lawn care
- Entertainment
- Household
- Gifts
- Auto
- Vacation
- Medical and Dental
- Insurance
- Taxes
- Education
- Mortgage/Rent
- Savings
Using your checkbook, computer program, spreadsheets, receipts, etc., calculate what you spent in each category over the last year. For example your electric/heating bills, monthly mortgage/rent payment, etc. In some cases, you will find that expenses are the same each month, like rent for example.
Some categories might be a little more difficult. Take your monthly electric/heating bill, for instance. Some months, it might be higher because you needed to rely more on your furnace or air conditioner. That’s OK. Use the highest utility invoice as a base amount for your budget. If your largest utility bill was $100, then calculate your monthly budget at $100 for each month. Obviously, many months are going to be well below that amount, so you can adjust your budget accordingly as you progress each month. Note: saving $30 on your April utility bill doesn’t mean that you’re going to unnecessarily spend $30 on a steak dinner. Instead, you can shift the “extra” funds to another budget category or, better yet, put it into savings.
If you create a budget – and stick to it – you’ll always have the funds on hand to make necessary payments on time, build your nest egg savings account and have some cash in case of emergency.
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Check out another blog by Evan Vitale at http://evanvitale.net.
