setting up a budget. We all know we need one, a few of us
actually have one, and fewer still manage to live within it. Why
is it so intimidating?
Maybe it seems like such an overwhelming task that you don't
even want to start thinking about it. Maybe you don't actually
know where to start. Maybe you think that it will require hours
and hours to do.
Maybe you're afraid of your money; after all, it seems to pretty
much rule your life-you may get up thinking about it and go to
bed thinking about it. Whatever your reason, now is the time to
start!
Step 1: Where to Start
There are two essential things that you need to know when
preparing a budget: what comes in and what goes out. Now
that's an oversimplification, of course, but that's all a budget is-
income and expenses.
Start by assembling past paycheck stubs, dividend receipts, etc.,
to determine your income. A survey of the previous three
months is usually good enough to establish this.
Next assemble two to three months worth of expenses. Get all
of your bills together, your checkbook register, receipts, etc.
Step 2: Determine the Time Frame
Decide if you want to budget weekly, by the paycheck, monthly,
quarterly, etc. How often you get paid may heavily influence this
decision. Most people just budget by the month. Remember that
you may have some expenses that happen quarterly, semi-
annually, or even annually, things like insurance or car
registration. You'll need to plan accordingly (see Step 5).
Step 3: Choose a Tracking Method
Choose a method for tracking expenses (and income, if desired).
Simple Joe offers the Expense Tracker PC software as an easy
and user-friendly way to track expenses (see
http://www.simplejoe.com/expensetracker/index.htm).
Quicken and MS Money are also good tools if you are pretty
computer literate. You can also set up a spreadsheet program, if
that's something you enjoy doing.
You can even use good old pencil and paper. Do whatever will
be easiest for you to maintain.
Step 4: Establish Categories
Select categories that fit your needs. Some people like just a
few categories, some use a multitude of categories, others use
subcategories. It really depends on how detail-oriented you
want to be. General categories might include: auto, house, food,
medical, insurance, utilities, etc. Specific categories (usually best
as subcategories) could include: auto-insurance, fuel,
maintenance; food-groceries, takeout, dining out; etc. You can
always add or remove categories or subcategories later.
Step 5: Establish Spending Amounts
Review the income and expenses that you gathered. Put the
expenses into the categories you have established so you can
see where you've been spending. Total them and compare them
to your income. How have you been doing? If you're
overspending, determine where you can cut.
Establish new budget amounts for the time period you have
chosen based on past expenses. Remember also to budget for
quarterly, semi-annual, or annual expenses. (Example: you pay
your car insurance every 6 months; divide that payment by 6
and budget that amount every month; put it aside where it
won't be spent!)
Try to be flexible in your budgeting. Budgeting every last penny
you earn may not be the best course because there are always
unpredictable expenses that pop up. Be sure to budget some
savings, even if all you can save is $5 a month. It's great to get
into the habit of paying yourself first.
Step 6: Track Your Income And Expenses
Whether it's daily or weekly, or just every few days, you need
sit down and enter your expenses into your tracking method. If
you put it off too long it will become too overwhelming and you'll
give up.
Devoting just a few minutes a day is a lot better than three
hours at the end of the month! Keeping close track of your
expenses will also help you to stay in line with your budget.
You'll be more aware of your money and more careful not to
spend what you don't have.
Remember to collect receipts for everything, especially things
you buy with cash. This will make tracking a lot easier. If a
receipt has purchases that fall into more than one category,
divide them up accordingly.
Step 7: Revisit the Budget Often
Revisit your budget periodically. Review your expenses. See
what's working and what isn't. Rework the numbers as
necessary. If you are single, this should be pretty easy.
However, if you are married, you may have one or two incomes
in your household; both people should know where the money
is going, regardless of who is earning it.
Finally, remember that budgets are not set in stone. You are in
control, not your money. Make it a goal to live within your
budget. You can do it!
Chemain Evans is a quality control specialist for Simple Joe, Inc. Income & Expenses PC software is a Simple Joe product that is a quick and simple way to keep track of your expenses and stay within your budget. Learn more at http://www.simplejoe.com