To start a budget, you need to decide on either a budgeting software, using excel, or using a
regular notebook and pen. Of course, using software or excel is going to be much easier for you, so
I would suggest using one of them. If you have a very small budget, a notebook might be fine, but
for most, software would be best.
Next, you need to write down all of your income sources. These are called your cash inflows. These
include wages, bonuses, tips, interest income, capital gains, dividends, and any other money you
make each month. Record these as your monthly cash inflows.
Then, do the same with your monthly cash outflows. Your cash outflows are everywhere you spend
money. These include mortgage or rent, car payments, gas, food, clothes, utilities, entertainment,
and absolutely everything you spend your money on every month. Include everything, whether you pay
cash, check, or with a credit card.
By taking the difference of these two values you will find your net cash flows. If you have a
positive net cash flows, this means you have extra money. Let’s say your net cash flows is $500.
You have $500 extra every month after all these expenses. You might normally put this into savings
or investments.
If you have a negative net cash flows, this means you are going into debt each and every month. If
your net cash flow is -$200 every month, you are going into debt $200 every month. In actuality, it
is more because you are probably being charged interest on the debt you have because it’s either a
loan or on a credit card.
If you break even, you really aren’t in a great situation either, unless you are including money
invested in your expenses, which you shouldn’t for now. No matter what situation you are in, you
need to go through your expenses and see where you can cut back.
To keep up a budget, you need to continue to record all your income and expenses every month. After
you’ve gone through everything and found where you can cut back, make sure you only buy where you
have allowed yourself.
If you use credit cards, pay off the balance every month to avoid paying interest and make
recording your expenses much simpler. Of course, the no interest is the real bonus there. If you
have credit card debt, DON”T PUT ANYTHING ON OUR CARD. You need to work on paying off your debt and
staying away from more.
Follow your budget every month whether it be in a notebook or using software. Always be aware of
where you are spending your money. If you don’t need it, don’t buy it. Instead, save a small
portion every month for fun money. Having savings accounts for vacation funds, car funds, and any
other types of funds are a great way to compromise between getting what you want and staying
financially secure.
Samantha Fredell
Do you wonder where your money goes? Don't let your poor spending habits ruin your life. If you
want to learn more about budgeting and how budgeting can help you build wealth and financial
security, go to BudgetingMadeEasy.info.
