The biggest and most important tip in getting started with a budget is to simply start. It may sound simple enough, but it’s no easy task. However, I’m here to tell you that all of that hard work that goes into this crucial exercise will pay off big time! We all know why it is important to start a budget. Getting started with a budget will help you determine where your money is currently going, what your spending habits are, and narrow down your surpluses and deficits.
Getting Started With a Budget
You’ll need to start by getting an idea of your budget categories. Begin by writing down where you think all of your money goes on a monthly basis. Start with your income (paycheck, child support), then fixed expenses (rent, utilities, loan payments), and then your variable expenses (groceries, gas, activities). Use as many categories as you need to in order to bucket out where you think you are currently putting your money.
This is a very enlightening exercise to go through because as you begin tracking your actual income and spending each month, you may be in store of some surprises, both good and bad.
Tools of the trade
There are many tools to help you get started with a budget. Don’t be discouraged if you have to try a couple of different options before settling on one. The important thing is to find what works best for you.
The first option you have is to use a spreadsheet, like Excel. If you don’t want to start from scratch, there are several resources available on line for template spreadsheets. You’ll want to start by going through your bank statements for the last few months and enter everything you spent and where you spent it onto the spreadsheet. Make sure you include cash purchases! You can then create basic categories and begin to sort where your hard earned dollars were spent. If you don’t have bank statements, start saving all of your receipts (which you should do anyway) and enter them into in the spreadsheet each week. Don’t forget to include your income in your budget. You will start to notice how these trends compare to your original budget categories.
The second option, and probably most preferred way, is to use one of the many electronic budgeting tools available. There are paid options like Microsoft Money or Quicken, and free options like Mint or Wave Accounting.
I personally use Mint since it takes all of the initial hard work and does it for you. You create an account and add all of your banking, saving, and loan information. The software then transfers all your information for you. From there, you simply need to make sure you are logging in on a weekly basis and updating your transactions. More on Mint.com in a future post.
Creating a budget isn’t always the most exciting task, so you’ll want to find a tool that makes it easier for you, this way you are more likely to stay on track.
Stay the course
Now that you’ve gotten started with your budget and gone through this initial exercise, the important thing is to keep at it. It may take a couple good months of steady tracking for you to begin to get a real idea on what you’re realistically making and spending. Some months you may have a surplus, while other months you may experience a deficit. These ebbs and flows will help you determine areas that you may be able to cut back on or where you may be able to save some of your hard earned money.