Most people don’t know how to make a budget. And, even when they do, they often shoot too high, making things difficult for themselves. If you want to get better at managing your money, but you don’t know where to start, here are some ideas that even the most financially illiterate can follow.
Write Down Everything
Most people don’t write down their expenses, which is one of the big reasons they can’t manage their money. You don’t need to make this a complicated affair. Just write down all your major expenses. This includes things like loans, mortgages, debts, and regular expenses like insurance and utilities, including your cellphone bill.
Examine your expenses, especially bills like insurance, which can creep up on you over time. According to Craig, Kelley & Faultless, car accident lawyer in Indianapolis, some insurers don’t pay (or resist paying) when a claim is filed. So, it makes sense to check out the claims-paying history of your insurer, balance that with the cost you pay for the coverage, and switch when it makes sense (i.e. make sure you have a reasonably-priced insurer that actually pays out without too much fuss).
Other bills, like your cell phone, T.V., and gas and electric, can sometimes be negotiated based on the tier or rate plan you use. For some utilities, the price is fixed, but you can still shop around for a different supplier.
Understand Why You’re Doing This
If you’re developing a budget because someone else told you it was a good idea, that’s not going to help you. If you’re just following steps in a personal finance workbook — again, not a great idea. People make budgets because they want to achieve their financial goals. A budget helps them organize their finances, and simplify things.
A budget also helps you spend less on things that don’t matter, and more on things that do.
It’s not a solution to your financial problems, but it does help you be more objective about them. When you see what you earn, and how it impacts your life, you’re more able to make better financial decisions. And, by writing everything down, you’re better able to actually manage your money.
Have Specific Goals
Goals are important, but most people don’t make good ones. Whatever it is you want to do over the long-term, make sure you make the goal explicit. An effective budget is likely going to involve you making some difficult choices. But, those choices are almost always worth making, and the priorities you set will ultimately improve your finances.
Know How Much You Make
Take a look at your paycheck, after taxes. This is how much you make. This is an important thing to know. It’s the basis for your budget, and it tells you how much you can spend during the month. It also helps you establish the basis for savings.
Use A Simple Budgeting Tool
If you need a software app to make things easier to manage, stick with something that’s intuitive and easy for you to understand. A few examples of such apps might be Mint.com or YNAB.
Nicole Bird is a working Mom on a strict budget. Always reading personal finance articles, but often finding them unhelpful or impossible to stick to, Nicole has taken to writing her own articles to help people beat the budget!
Love Counting My Pennies?
Sign up to get our latest content by email.