What sort of budget strategy do you have? Is it working? Budgeting can be a chore that we often put off, but if you have dreams and goals… it can help you achieve them.
The first step in budgeting is coming up with an accurate measure of your expenses and income. Start by tracking these for at least two months; and then attempt to look at averages for certain fluctuating expenses and income like heat or sales commissions.
Then create a spreadsheet – either on a piece of paper, excel document or budgeting software. The first part of the spreadsheet will be your actuals. Once you have these determined, then you can evaluate your current money situation.
For many people who have not regularly kept a budget, often just tracking expenses and looking at actuals is enlightening enough. Take the time to look at each expense to see if the money you spend on it represents your plans and goals. It can also be good to break down expenses as a percent to the total. This can really pose the question if an expense is out of whack of your long range plans.
A good example would be something like exercise. If one of your long term goals is to lose weight or get in shape, see where you spend your money. If you spend a large portion of your monthly budget on a gym membership, then that would be aligned with your goals. But, if instead you spend a large portion of your budget on eating out… the cost of eating out may be preventing you from achieving your goal of weight reduction and also be keeping you from affording that gym membership you desire.
This scenario is a simple one, but these sorts of budgeting decisions can help you to truly align your money habits with your personal goals. This is an important process to ensure that your financial choices are not holding your back.
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