Budgeting Basics

Want to make your money last longer? Tired of living paycheck to paycheck? Do you want to get in control of your finances? Once you choose a career that meets your financial needs creating a budget will allow you to:

• Calculate your expenses.
  
• Help you plan for unexpected expenses.
• Avoid debt.
• Put you on the path toward financial wellness.

Simple Steps to Create a Budget

The word "budget" is enough to get people's blood pressure rising, but it shouldn't! Making and following a budget isn't all that hard. Just follow these simple steps, and you'll be set!

Set goals.

Setting goals can help you stay motivated to keep a budget. Are you planning to buy a car or make a down payment on a home? Are you going back to school soon? Make sure that you have a goal in mind so that keeping a budget will be a means to an end.

Track your spending habits.

You need to know where your money is going. For one or two weeks, keep receipts from all your daily purchases and add up all your expenses. This will give you an idea of how much money you need to set aside and recognize the things you spend the most on.

Group your expenses.

Figure out which expenses are fixed and which ones are flexible. Fixed expenses are those that are necessary and need to be paid every month. They may be the same amount each time you pay them (e.g. rent, utilities, transportation, and food). On the other hand, flexible expenses are those which are not always necessary (e.g. eating out, buying new clothes, getting coffee). You should only pay for them after you take care of your fixed expenses.

Create a budget.

Figure out how much money you want to set aside for each category of expenses. Then subtract those expenses from your income. Decide whether you will use a weekly, biweekly, or monthly budget based on your personal cash flow. After you have set your budget, match your spending habits to the amount of money that you want to spend on each category. Think about how much you bring in each month or pay period and compare them to your budget amount. If you're "living above your means," you have two options. You can take on another job that brings in extra cash to increase your means, or you could cut down on your spending so that your cost of living more closely matches your means.

Stay Motivated

Remember, the hardest part of keeping a budget is changing your spending habits so you can stay within your budget. Here are two tips for staying motivated:

• Make savings a fixed expense in your budget. Then you are in the habit of saving money.
  
• Reward yourself each month for staying true to your budgeting goals. You can set aside money to put toward something in your flexible expenses group.