To help create a spending budget that’s not just sensible, but also effective, we need to start by calculating our income. Once we’ve calculated our income, then we can list our expenses by first making a list of our fixed expenses such as rent or mortgage payments, automobile payments, insurance premiums, etc. After that, we need to create a list of our fluctuating expenses. These include expenses for dining, dry cleaning, hobbies, etc. along with other invoices or expenses which don’t have a payment that is consistent. Spend some time to examine old bank statements to assist with calculating estimated amounts for these expenses. This next step is vital to successful budgeting. We have to separate our needs and wants. Once we have our lists of expenses, we need to assess those lists for areas where it’s possible to curb costs or eliminate them altogether. This is especially significant to successful budgeting in order to get rid of debt or conserve money toward a particular goal. Any place where we see we’re definitely wasting money, do away with it! We also need to make sure our expectancy is realistic. The aim of an effective budget is to plan for real expenses while at the same time setting targets for spending that will make it possible for us to conserve money. To help with the process of putting together a budget, consider using budgeting apps or programs to give guidance in creating an effective budget and savings goals.
The Nasty “B” Word!
When you hear the word budget, it might send shivers down your spine. For whatever reason, that seems to be the reaction most people associate with it, which is unfortunate because having a budget has the opposite affect of what most people think. To create and stick to a budget is actually empowering, because it allows you to have control over your money.
Having control of your money is the most gratifying thing about keeping a budget. In order to have control of your money you need to know where every dollar is coming in from and where every dollar is or will be going out to. It’s about you having control over your money, so that your money doesn’t have control over you. That’s the power of budgeting!
“We must consult our means rather than our wishes.” – George Washington
The control you have over your money by budgeting is about knowing the numbers…your financial numbers. The dollars and cents of your cash flow from your income and expenses. Without knowing your numbers, you’re just flying blind with no goal or direction. How can you get to where you want to go if you don’t have a plan on how to get there?!
Start with envisioning your future and how your finances fit into it and come up with the financial goals that will help you to work toward that vision. From those goals is where you can now take the time to go through the process of setting up an effective budget and most importantly, you need to stick to it. So, create that budget, because the path to financial freedom is waiting for you.
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