Surprisingly, many people do not have a budget. I think a budget can intimidate some families, and that is why there is no budget in place. A budget is a great thing though. With a budget, you can learn about where you are over spending, learn how to save money, and so on.
You may not even realize how much you are spending each month if you didn’t have a budget before because you may never have actually analyzed your spending.
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Here are my tips to create an effective budget that will work for you.
Know how much you are spending each month.
One of the first steps when creating your new budget is to know how much you are actually spending each month. Gather receipts, bills, and all of your expenses from last month and tally them all up. Put them into certain categories (such as food, gas, home, and so on) so that you know how much you are actually spending altogether, and so that you know how much you are spending in each category.
This step can be a real eye opener, especially if you have never tallied your monthly spending before. You will probably be very shocked.
Know how much you are bringing in each month.
After you realize how much you are spending each month, you need to figure out how much you bring in. You need to take your after tax income that you make in a month. Now, this can get tricky if you have never budgeted before.
If you are paid every two weeks or if you are paid twice a month, then your budget will be different. And YES, there is a difference between getting paid twice a month and being paid every two weeks.
Use a software.
If you are new to budgeting, then a good budgeting software may be a lifesaver. One that everyone seems to love is Mint.com. However, it can be a little confusing to use at first. There are books out there that you can use to understand Mint.com even better, such as the Mint Manual.
Give yourself some spending money.
A budget can be a nice way to limit your spending in your mind, but you probably still need to give yourself some spending money. A budget is not about restrict what you are spending. It’s about acknowledging your spending.
Be realistic with your budget.
To continue with the above step, you need to be realistic with your budget. If you don’t give yourself spending money in your budget, but you constantly spend money on yourself anyways, then you are not being very realistic with your budget.
Just because you cut it out of your budget does not mean that it is not there!
What is your top budget tip? Why do you budget?