If you don’t have a budget in mind, you won’t be able to keep track of and control your spending habits. This results in depreciating savings, which, as can be imagined, means a whole lot of trouble. If you are working hard to earn money, you need to be sure that you have some money in the till, when you need it most. You want to save so that you can invest and make sure that you have a good life when you are older and can’t work as hard as you are doing now.
Let’s face it; budget is an absolute necessity and a very important aspect of your financial planning. Let’s take a look at 4 important steps that are of tremendous importance for working out your spending budget:
Step 1: How much are you spending now?
To answer the question, how to budget money, you need to answer a much simpler question and that is how you are spending your money currently. Make a detailed list of your expenses over a month. Make sure that you have left nothing out. Even your unplanned expenses must be a part of this list.
Step 2: Evaluation and Goal Setting
The first step was really simple, but this one is a little difficult. Once you have a list of expenses, evaluate it thoroughly. Mark the expenses that are necessary, and the ones that you could have done without. Here, it’s important to look at your spending through a need to live a happy and satisfied life. So, if you think that trip to a spa every month rejuvenates you and makes you feel happy, don’t look at it as an unnecessary expense. After you are done evaluating, make sure that you work out an objective, which in the case of your budget will be the particular amount you want to save in a calendar month or year. It will be a good idea to work out a short term savings objective and a long term one.
Now identify a budget that will help you meet your monthly and long term goals.
Step 3: Track Spending to Stay within the Budget
Make note of your spending patterns and keep checking whether its meeting your budget guidelines or not. If you think you are not able to limit your expenses with respect to your budget, take stock of your spending pattern and work out your subsequent spending for the month. You will need to keep tweaking your spending pattern to make sure that it is within permissible limits. Otherwise, it makes no sense to have a budget in the first place.
Step 4: Don’t Give Up
It takes a lot of effort and more to stick to a budget that you have drawn up for yourself. There is a chance that you won’t be able to stick to it the first month or even in the next few months, but over time you will get the hang of it. So don’t give up.
End Words
So here it is. The four step process for planning a budget that will help you save your hard earned money. On the face of it, the steps look simple, but they aren’t. But that doesn’t mean you shouldn’t work out a budget. The savings benefits are tremendous.