Does “budget” sound like a four-letter word? For many people it does. Or maybe the reality is it’s just hard to know where to get started.
In its most simple format, a budget is simply an exercise in building a “list” that captures your income and your expenses. You don’t need any really fancy software or apps - take a moment – pull out a piece of paper, open up Excel or Google Sheets and get started. The hardest part of budgeting is simply getting started.
Once you start building a budget, you’ll get the hang of it. Keep working on it. Over time it will become a habit. And budgeting is a very important personal finance habit.
Over time, you want to make sure that your income is greater than your expenses. If you make this a habit you will see the benefits start to “accrue” and you’ll feel less stressed about money.
Don’t forget to pay yourself first – carve out some savings and investment money right off the top.
Save your surplus (i.e. the leftover money) – over time you will build up a cushion to cover the unexpected.
The first step is to take stock of your current financial situation. Rather not look at your checking account for fear your balance is too low? If you don’t know what you have, how do you know how much you can spend?
Gathering information about what you have and what you owe is essential for making the right decisions about your money. For a step-by-step guide on taking stock of your finances, click here.
After you've assessed your current financial situation, you should set some goals. Financial goals, like anything else, should be measurable and attainable.
Be realistic about the goals you set. Setting a goal to save $1 million by tomorrow would be nearly impossible to achieve (unless you win the lottery – we can all dream!). Even if you did win the lottery, you would still need goals and a budget! Click here for help on setting financial goals.