If you've never budgeted before, it can seem like a gargantuan task that only produces something that will make you miserable. And if you consider yourself bad with money or find that you have a difficult time living within your means, budgeting can feel like one more way to fail financially.Consider the following steps
1. See Money as a Tool
We tend to think of money in a lot of different ways. Money can be freedom, it can be despair, it can mean power or significance, or any one of a number of things. The point is, to be good at budgeting, develop the mindset that money is a tool. It helps you do the things that you want and need to do. No matter how much or how little you have, your money can help you achieve your goals.
2. Record Your Transactions
On a practical level, you will need a record of your transactions to start a budget, and you will need to keep recording them to continue budgeting. You can do this by hand, via an app, or once a week on a spreadsheet. Do it however works for you, but learn to record your transactions and you will be well on your way to budgeting.
3. Assess Your Spending
Recording your transactions won't help if you never think about them. Learn to categorize your transactions in whatever way is meaningful for you, so you can see how much you're spending in different areas. This can help you decide where to spend more, where to spend less, and what cutting back might look like in your everyday life.
4. Make a Budget
This might be the most obvious skill in this list, but it's also one of the most important. There are spreadsheets you can download, programs that can help you see your spending in different ways, and more. Some things to think about before you choose a method involve deciding whether you want to go old school or online, and whether you want to store it on your personal computer or in the cloud.
5. Write It Out
Throughout the budgeting and recording process, it will help if you actually write things out. This can be on a computer, though there is something about the act of writing something and then seeing it there in your own handwriting that helps you remember. Whatever you do, don't keep your budget in your head. It's easy for numbers to become fuzzy and for you to forget about your budget entirely. Instead, put your budget where you can see it often, so that it feels real and you remember your goals.
6. Plan
When you make your budget, don't just think about what you need right now, or even your monthly expenses. Think, too, about expenses that only come around every so often. Car insurance, life insurance and property taxes are a few line items that can fall into these categories. Then, save a little bit of money every month toward these items so you can pay them without worry when that bill shows up.
7. Include Spending Money
If you don't have spending money, you will feel like your budget is a cage you need to break out of, rather than a structure supporting you and your goals. Even if all you can afford is $5, give yourself something. This can go against the grain, especially if you have a lot of debt or very little income. However, you are important. And you will be happier keeping your budget if you know you have a little money you can spend however you want.
8. Make a System That Works for You
It's easy to get sucked into a system that doesn't work for you. For instance, you may not be able to track your spending every day. If that's you, then don't buy into a budgeting system that requires this. There are plenty of systems where you can record once a week or so. If the system doesn't work for you, you won't do it, and there won't be any value to budgeting. Keep trying things until you find something you like.
9. Live With Discipline
This is a huge skill and one that won't happen overnight. Living a disciplined life, though, will go far toward helping you make and keep your budget. Pay attention to your budget. Update it. And when you don't have any money left for something, stop spending! It can help to breathe through your desires, to remind yourself of your bigger goals and to give yourself a waiting period before you buy things.
10. Know When to Splurge
This is a tricky skill, especially in light of the one above. However, there are times in every life when it's right to splurge. This doesn't have to be a huge spending binge — it can be something as small as a coffee with a friend. A lot of times, this comes into play when you choose to buy something of a higher quality even though it costs more. It's up to you to decide when to splurge, but make sure there's some room for it in your financial life.
11. Ask Yourself Hard Questions
When you're budgeting alone or you are the one in charge of the budget, it can be easy to let things slide. Get into the habit of asking yourself hard questions, like, "Why do I always spend too much on entertainment?" and "Am I realistically able to take that vacation this year?" You may not like the answers you find, but being honest with yourself will ultimately help you become more aware of who you are and how things work inside of you — which will help you meet your goals, financial and otherwise.
Source: Kiplinger
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