Budgeting Basics Made Easy
Are You Following Budgeting Basics?
If you are tired of living from paycheck to paycheck but not tired enough, the following information about budgeting will be meaningless. But if you want to change your financial life, read on, you may find out that it’s not as hard to do as you think.
Until you reach the point where you are completely fed up with the paycheck-to-paycheck-lifestyle you are not ready to make any changes, even changes that will improve your lifestyle. You will be perpetually stuck in paycheck-to-paycheck living until you are ready to completely shift gears on your finances. To change your ways you have to be willing to take the first step. Are you ready to take that first step? Are you ready to, one, track your current expenses; two, subtract those expenses from your current income and three, analyze your spending habits with the intent of making any necessary changes?
Budgeting Is So Misunderstood
Many people avoid budgeting because they have such a misunderstanding about how to budget and the purpose of living on a budget.
Many folks think that their life as they know it will end under the budgeting rules. People think that they have to stop living and having fun once they start following a budget. Their friends will dump them because they will not be able to afford to go anywhere or buy anything ever again once they start living on a budget. Their life will forever be boring once they start budgeting. No, no, no. Those misunderstandings could not be farther from the truth. Sometimes people make budgeting sound so complicated and controlling but it is not.
The purpose of budgeting is to control your spending, not your life. But that only works if you approach budgeting correctly. If you go too far and make your budget lifestyle too restrictive, of course you will feel confined and limited. So be realistic, otherwise you may start out with enthusiasm but quit once the going gets too tough. Yes you can go out for dinner and drinks with your friends; yes you can buy flowers for your sweetheart; yes you can splurge on the holidays…just don’t make it a regular habit. But if you do overspend a bit (once in a while) on dinners, forget-me-nots or holidays just be sure to cut back somewhere else to balance out your overall spending.
Where To Start On Your Budgeting Journey
If you are serious about changing your financial life, the best budget is a written budget. If it is in writing you are more likely to hold yourself accountable, refer back to it as a reminder and make changes if need be. Budgeting starts with you. You have to make the decision that you are willing to do whatever it takes and will stay on coarse even when you feel like quitting.
- Write down every single thing you spend money on for one month. You will usually spend the same amount of money on the same things every month, so tracking for one month should be good. Your list should include all of your expenses, which means, fixed ones (a rent or mortgage payment, car loans, student loans, insurance and utilities) and variable ones (food, entertainment, café lattes, transportation costs).
- Next, analyze the “what”. What did you spent money on? Was the purchase necessary, can it be eliminated, can it be reduced? Fixed expenses are usually non-adjustable or non-negotiable; but variable expenses are variable for a reason, they change often and can be more easily eliminated or reduced.
- Next, analyze your purchases even further. Determine if you are buying based on needs or wants? That may sound too basic, but there’s a lot of power behind need vs want purchasing habits. We get ourselves in financial trouble when we are flimsy with our spending. We are always wanting but do we actually need all that we want…most of the time we don’t but we buy anyway. So really focus on buying only what you need. Yes you need a boost every morning to get yourself started and coffee does the trick; but does it have to be a café latte from the coffee-house that just happens to be on your way to work? You want convenience but you just need a coffee lift. See the difference?
If you are living on beyond your means a budget will help you determine where your gaps exist. At that point you have 2 choices, you either adjust your spending or you go into debt. So what expenses can you eliminate? Can you learn to live on less than you earn? Maybe not right away, but with some practice you probably can. But the key is, you have to want to make a change. Without the desire to change, you may start off with good intentions, but get frustrated and quit. So before you start budgeting commit to it and you will be more likely to stick with it.
Budget Living Takes Time
Learning how to budget and stay with it takes some adjusting especially if you have never done it before. Budgeting is a lot like dieting. When you go on a diet you get so many calories per day. The diet experts will tell you that if you overeat one day it’s okay, just cut back on your caloric intake the next day. Take the same approach with budgeting as dieters do. When you are on a budget, you allocate so much money to spend for housing, food, entertainment, insurance, transportation, loans, etc. If you overspend in one of those categories, cut back somewhere else. Again with fixed expenses, you cannot usually cut back; but you can with your variable ones.
The great part about budgeting is that you can get your spending under control faster. And once you are in the habit of skimming back, spending wisely and deciding where to spend your money instead of spending whimsically your life will be less stressful. Why not try it, you have nothing to lose and you may actually like it. You won’t know until you try.