Often we tell ourselves that we need to budget, we try to cut down on our spending and do not succeed.
It is easy to fall off the budgeting wagon (as it were) if you don’t know why you should have a budget and see no reason to do so. Have a reason. Have a financial goal you want to reach. Whether it is pay off student loans at an accelerated pace, fully fund an emergency reserve, save for a vacation or send a child to college; having a financial goal you are emotionally attached to reaching gives you a reason to set and maintain a budget.
After deciding on your goals and the amount of money you will need each pay check to reach the most important goals, taking the next step is the hardest. It is not setting the budget, but being realistic about where you spend your money now. Tracking your expenses is one of the most useful things you can do. It will help you to understand where the money is trickling out and will give you power to decide where to spend your money when you set up your budget.
How to track? So many ways. You can use pen and paper, a spreadsheet, an app (of which there are many many many) or have your credit card track for you. The key is to track without judgement for three months and look at the results on a monthly basis so you get an understanding of the costs of those lunches, the gym membership, the groceries, vehicle costs and everything in between.
Now you are ready to set up your budget. Remember a budget is just a spending plan with you in control. You can set up a budget using a spreadsheet, an app, or cash in envelopes. Having tracked your expenses, you can now be realistic about finding the money to fund those financial goals, while still spending money on things and experiences that are important to you.
If you buy coffee from the local coffee shop and then walk on the beach in the morning, perhaps the experience you want is the beach walk while drinking coffee, not the waiting in line for mediocre coffee. Buy a steel mug, make coffee at home and reach your financial goal of saving enough for a plane ticket to Hawaii.
Doing the three step process of forming your financial goals, tracking your expenses and then setting up a budget will help you to stay on the wagon, reach those goals and maybe even have a morning walk on the beach while drinking an excellent cup of coffee in Hawaii!