Budgeting is a funny thing. Some people know exactly how much they spend, balancing their checking accounts every day. Others really don’t pay much attention to it, and thus find it difficult to make a budget and stick to it. For some, even the simplest budget rule—spend less than you make—seems too challenging. But it is possible for even the unmotivated to make a simple budget that governs everyday spending (not including housing and insurance expenditures). This outline shows simple steps to begin the budgeting process.
Know what your spending habits are by ascertaining where the money goes on a daily basis. If most spending is done on a debit or credit card, just review the monthly banking statement to see where most of the money is spent. Or write down all expenditures if they are paid in cash.
Create a spending plan by making a list of potential short-term purchases (that is, over the next 3 to 6 months), such as hotel reservations for a vacation, paying off a credit card, or adding to an emergency fund. Next, do the same for long-term (1 to 5 year) purchases. The same exercise can focus on a “wish list” of purchases—spending that will have a positive effect on your life in both the near- and long-term that can alter spending and savings plans.
Decide how much each item on the “wish list” will cost on a monthly basis. Then divide the total amount for an expenditure by the number of months until you need them.
Make saving money an automatic exercise: Diverting cash into a separate savings account, not the main checking account, is the best way to save money. Automatic recurring cash transfers from the main checking account into the separate savings account can be arranged.
Even the unmotivated consumer can learn a lot from this simple budgeting map. The most important thing to remember is to include the major, most critical expenditures, if you forget some of the details, they can be worked into the system once you get used to it.
Contact us at Isakov Planning Group if you want to learn more about simple ways to understand the budgeting process and importantly better ways to squeeze savings from your budgets.
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