Do you find yourself wondering where all your hard-earned dollars go? Setting a budget will help you hold on to more dollars, reduce anxiety and allow you to reach your financial goals faster. Follow these four steps:
1. Record your monthly spending. For one month, write down EVERY single cent you spend. Put everything in a category: food, clothing, gasoline, mortgage or rent, credit card payments, entertainment, pet expenses, etc. You will be surprised at how much you spend!
2. Calculate your monthly income. Add up all of your regular monthly income, including your paycheck and any other source of earnings, such as commission income, bonuses, interest accrual, a side business or child support.
3. Analyze your calculations. Evaluate how you can eliminate or reduce spending in each expense category until you reach a reasonable monthly allotment for each category. Put any extra income you can save toward debt reduction or toward future financial needs.
4. Set financial goals. Thinking far ahead will help you set goals and focus on saving for such things as a new car, home improvement projects, vacations, educational or medical expenses, the needs of a new baby or eliminating debt. Prioritize your financial goals and set dates for achieving them.
Knowing your true costs and income are the first steps toward mastering your personal finances. From there, determine your future financial goals and use budgetary discipline to reach them.
