Money Management 101: Creating and Using a Budget

​Managing Money 101: Creating and Using a Budget
 
Even when the economy is good and you're living comfortably on the money you're making, it's a good idea to use a budget. Many people cringe when they hear that word, because they think it means you can't have any fun or spend any money. That's far from the truth. Even a tight budget leaves room for fun and a little extra spending from time to time.
 
When you plan a budget, you must be realistic about what you're spending and saving. Don't say you spend $10 per week on lunches if you know you really spend $40. You can change the amounts later and cut back if necessary, but the first step is to get everything down on paper just as it is right now. That way, you can see what you're really spending.
 
You Might Be Really Surprised
 
Usually, people who create an honest budget by tracking their spending each month and writing everything down find that they are shocked at how much they're paying out. It's not just the bills, but also the little things like lunches and dinners out, coffee in the morning, and small purchases that add up.

​For one month, keep track of every cent you spend. Avoid hiding anything or sweeping it under the rug. Save all of your receipts and write them down. That means bills, spending money you withdrew from the bank, and anything else that was paid out in that time frame. At the end of the month, you'll have an accurate picture of what it's costing you to live for 30 days.
 
How to Lower Your Costs
 
After you get over the initial shock of your tracking experiment, you'll likely want to find ways to spend less. There are many ways to lower expenses, and they can depend somewhat on how you spend your income. Everyone is different, and not every idea will apply to each person.
 
Consider these ideas in order to decrease how much you spend each month:
 

• Adjust the thermostat by a few degrees to save on electricity or gas.
• Skip going out for lunch and coffee by bringing these things from home.
• Change to a less expensive cable TV, Internet, or cell phone plan.
• Have a yard sale to get rid of unwanted items and make some quick cash.
• Carpool or use public transit, and sell that second car.
• Buy groceries only during sales and stock up on often-used items.

 
Of course, there are plenty of other ways to save. What works for one family might not work for another. However, in all likelihood, you really don't need the latest gadgets, newest car, or brand-name clothing. You may want them, but that's not the same thing.
 
How much are unnecessary things really costing you? Is it worth it? When you really think deeply about those questions, you'll likely find that living a little more frugally would give you a better quality of life and freedom to do more things, like travel.
 
Budgeting doesn't have to be depressing and minimalist. However, it can give you an accurate picture of what you're spending. Then, you can decide how to spend less - or if you even want to spend less - and make changes that will benefit you in the long run.