Many of us have convinced ourselves that it’s hard or nearly impossible to develop an effective budget when, in reality, it could be quite simple. Starting today, we need to throw out all of the negative preconceptions about budgeting. As a business owner, its important for me to keep track of my monthly income, so that I can allocate money to growing the business. If you learn how to be resourceful, you can achieve all of your financial goals.
If you’re new to budgeting it’s important to have simplicity in your budget. I am going to share with you 3 easy steps for budgeting that I have found useful.
1.Keep Track of Your Income
Before you do anything else, you have to have a good understanding of your monthly income. How much do you earn each month? For some, monthly income can vary month to month. I suggest reviewing your income for the past several months, and calculate your average monthly income.
2. List All Monthly Expenses
Now you can ask yourself, what are the things that you have to pay every month? Visually tracking your expenses allows you to see where your money is going. I’ve found it helpful to track my spending for an entire month and categorize these expenses as I list them (i.e. Rent, Utilities, Groceries, Credit cards, etc.).
3. Contribute To Financial Goals
Finally, once you’ve subtracted your expenses from your income, do you have anything left? If you don’t, you may want to revisit your expenses and see which categories you can reduce your spending. If you do have a remaining balance, how will you use what’s left towards your financial goals? For some people, a financial goal may be to pay off credit card debt or increase your savings. You can slowly achieve either of these goals by putting a small percentage of what you have left towards your goal. For me, my goal has been to increase my savings. To do this, I’ve created separate savings accounts to avoid spending any of my savings.
It’s important to keep in mind that you may incur unexpected expenses, so things may not always work out as planned. If this happens, don’t be so quick to throw away the entire budget. Just continue to monitor and readjust your budget. You work hard for your money, so find ways to use it more effectively.
Do you budget your money? What strategies have you found useful?