3 Tips For Transforming Your Finances By Creating A Budget That Works
Getting to a point in your life where you have financial freedom takes time and work, and the number one thing it requires is a good budget. Developing a budget that works is not easy, but it is the single most important thing you can do for your financial future. As you begin setting up a budget, keep these important tips in mind to help you succeed with your finances.
Make a List
A budget always begins with making a list, and this list should include all of your income and expenses. When it comes to expenses, you will need to include all of your regular monthly bills, but that is not all. You must account for all expenditures you make, and a good way to ensure that you have thought of everything is to look at your checkbook or bank statements.
By doing this, you will be able to see exactly where you spend money, and this will help you create a budget that includes everything. With your list, you will need to:
- Write down the total amount of income you have for the month.
- Add up the total regular expenses you have for the month.
- Subtract these two numbers to find out your disposable income.
Your disposable income is what you will use for every other expenditure you make.
Account For Every Dollar
One of the best ways to control your spending and stick to your budget is to make a budget where you account for every dollar of income you have. With this method, every dollar has a purpose, and you will never overspend in any area if you can stick with this.
To incorporate this into your budget you must begin with your disposable income amount. Your goal with your budget is to take the disposable income you have and divide it up between every different category of expense not included in your regular expenses. This should include money for:
- Savings
- Groceries
- Gas
- Eating out
- Snacks and beverages
- Clothing
- Hobbies
- Activities and recreation
- Anything else you regularly spend money on (miscellaneous)
If you assign a dollar amount to each category and can avoid overspending in any of the categories, you will have a budget that works.
Some people like to do this with envelopes or with a separate account.
Set Up a System
Assigning a budgeted amount to every category is a great way to control your spending, and here are two great ideas that you can use to help you stick to this.
Use a Separate Account
If possible, have two or more checking accounts. Use one account for your regular monthly bills, and use another account for everything else. Each week when you get paid, put the correct amount of money into your checking account you use for paying bills. Place the rest of the money in the other account.
This system works well if you are good at tracking what you spend on paper, but there is another system that might work better for you.
Use Envelopes
With this option, you will place all of the bill money in your checking account, but you will withdraw all of the rest. If you are planning on saving money, you can immediately transfer this amount to your savings account before proceeding.
You will then need to get cash for the rest of the money, and you will need one envelope for each category of spending you have. Place the budgeted amount of cash into each of the envelopes and carry these around with you.
You will be able to look inside the envelopes at any time to see how much money you have, and you might discover that you have extra left in some of them at the end of the month. You can take the extra money and save it or put it towards a vacation fund or something else.
If you follow these tips, you may be able to develop a budget that helps you succeed financially. If you need help setting this up, or if you would like to learn additional tips for budgeting, make an appointment with a financial advisor like http://www.landsbergbennett.com/.