Whether you live paycheck to paycheck or have loads of money rolling in, you need a budget! When you don’t budget your money, your money is controlling you. Creating a budget a allows you to control the money. Creating a budget and sticking with it takes patience and dedication but if you stick with it you will see a financial gain.
There are several different budgets, you will need to decide which one will work best for your current situation. Remember that making a budget doesn’t need to be complicated! Today I’ve put together a few tips to help you get started on your budget.
Pick a Budget
There are so many different types of budgets but the most common household budgets are the envelope system, line item budget and a percentage budget.
An envelope budget is very popular among many households but it is easiest to use if you mainly use cash. Each category in your budget will get an envelope and you will put a designated amount of money in that envelope. Once the envelope is empty the money for that category is gone! Do not pull from other areas of the budget.
A line item budget is created using a spreadsheet and is great if you love seeing real numbers. Every line will get an expense with an estimated cost with the hope of staying at or under what you estimated. A line budget is a living, breathing document that you will need to adjust every month based on your estimates.
A percentage budget is the perfect option for anyone who likes dealing in exact numbers. If you are good with numbers then the percentage budget will probably work great for you. You start the month off with 100% and every expense in your home is allocated a percentage. Food might get 15%, the mortgage 30% and gas maybe 7%. You will decide what percentage goes to each category.
Account For All Income and Expenses
In order for any budget to work you need to know how much income you have coming in and going out. There is no possible way to make a budget work if you haven’t accounted for everything. If you purchase a $1 pastry every morning then you need to budget $30 for pastries. No matter how big or small the purchases are they still need to be accounted for.
You also need to account for any money that comes in during the month. If you have regular paychecks this process is a lot easier. If your pay is sporadic or commission based you will need to look over the last 12-months of income to get a good average.
Involve Your Spouse
If you are married or have a significant other it is important to involve them in the budget planning process. All parties need to be aware of what is going on with the money and allowed to make decisions with how the money is budgeted. Creating a budget without your spouses input could end up creating more problems. If you want your spouse to stick with the budget then they need to be included from the very first step.
Budget For Fun
One of the biggest reasons budgets fail is because the budget seems very restrictive. Just because you are budgeting your money doesn’t mean you can go out to eat dinner once a in a while, splurge at Target or take the family to the movies. When you are creating your budget make sure to designate a specific amount for fun! It doesn’t matter if you designate $10 a month or $500 a month to fun. The point is to have some amount available for fun or splurge purposes