Six Simple Steps For Building A Better Budget
Why a Pencil is the Best Weapon in the Fight to Save Money
The mere act of writing down — on paper, in a spreadsheet, or on a website or app — how much money you have coming in and how much is going out can make a huge difference when it comes to getting a handle on your finances.
It can help you avoid outright waste on things like late fees and overdraft penalties. It will help you identify where you could save money without painful cuts. And eventually it will enable you to spend less than you bring in so you can save for the future.
The short-term goal should be to reduce your spending to 90% or less of your income.
Here are six steps you need to take:
1. Add up your income.
Tally up your family’s monthly after-tax income.
2. Track your monthly spending.
Make a list of all of your regularly occurring expenses: Mortgage or rent, utilities, insurance, child care, groceries, gas, car payments and access to phone, Internet and TV service are some common ones.
3. Don’t forget the little things.
You may still do a sizable amount of spending that’s hard to group into large monthly buckets — money, perhaps, that you withdraw at the ATM and spend on day-to-day needs. Start tracking where that cash is going….
4. Expect the unexpected.
Often, “unexpected” expenses that can derail a budget aren’t really so unexpected. Holiday gifts for your kids’ teachers? Happens every year.
5. Look for items to cut.
If you’re spending more than you make, creating a budget can help you find places to cut the fat.
6. Get high-tech help.
A personal-finance program like Quicken, or website or app like Mint, has built-in tools that can help you create a budget.
