Money Management 101: How To Start Budgeting


Whether experiencing good times or bad, it is always a good time to make and stick to a monthly or at least yearly budget.  Many people cringe at the thought because they believe it to mean that you can’t have any fun or spend any money at all.  This is so far from the truth that it’s funny!

Your budget should reflect both your near term and long term goals.  If you want to track exactly how much you can spend each month and then spend every dime, that’s still a budget.  If you have a goal of retirement or starting a business, spending all your money won’t get you there.

When planning a budget, be extremely realistic about what you spend and what you save.  Don’t budget $10 per week for lunches out when you know you go out more than once per week.  It is always easier to correct the amounts downward later on by cutting back, than to dip into savings to make up a shortfall.  Write down everything you spend for 3 months and then average them.

You Might Be Pleasantly Surprised….or maybe not

People who create an honest budget for the first time and then track their spending for a few months are often stunned by the actual amount that they’re spending each month.  Many people can ballpark the amount of their household bills, but smaller one-off expenses like lunches and dinners out, coffee on the way to work, and small clothing items are what really add up.

Avoid hiding anything or sweeping excess spending under the rug.  Save every receipt and write the amount down.  Don’t forget cash you take out at the ATM or bills that autopay from your account.  At the end of one month you will begin to have an accurate picture of what it costs you to live for 30 days.  After another month or two, average the three totals to smooth out any large expenses.

Focus on Lowering Costs

After the initial shock of your expense tracking you’ll likely be eager to find ways to spend less. There are numerous ways to lower your expenses and they depend entirely on how you spend your income.  Everyone is different and not every single idea will apply to each individual person.

∙    Adjust your thermostat down by a few degrees to save on electricity or gas for heating and cooling.
∙    Bring coffee and lunch from home instead of going out.
∙    Change to less expensive cable TV, Internet, and cell phone providers.
∙    Make quick cash at a yard sale and get rid of unwanted items as a bonus.
∙    Carpool with coworkers or use public transit and then sell your second car.
∙    Only buy groceries during sales and stock up items you use most often.

There are as many ways to save as there are to spend money.  What works for one family may or may not work for another.  In all likelihood, you know that you do not need the latest gadgets, a brand new car, or brand-name clothing.

Know how much unnecessary purchases are truly costing you.  Budgeting doesn’t have to be minimalist.  It should give you an accurate picture of what you’re spending and help you make changes to those habits to more closely align with your goals.

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