Ready To Make A Budget? Here's How To Prepare
So you want to write a budget, but you're not sure where to start? No Credit Needed has a list of ten simple but necessary steps to take before drafting your first spending plan. Most consumers will already have knocked off the basics like putting their checking and savings accounts in order, but everyone can take advantage of tips like tracking your spending for a full month and making sure you have a detailed list of your irregular expenses. Once you've done your homework, check out our guide to writing a beginner's budget and start mapping out your financial future.
10 Things To Do Before Creating Your Next Budget [No Credit Needed]
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I set up a quick Google Docs spreadsheet with all of our expenses, income, and income percentage. Now it shows how much we each owe towards certain bills/expenditures (eg savings), how much we each have left at the end of the month, etc etc.
It's insanely simple, especially if you pay all of your bills via your bank's bill pay service -- simply automate everything, including your savings.
Congress should read this.
Why? They have near-unlimited income. If their budget doesn't balance, they just get more out of our paychecks.
Budgets. Don't. Work. It's a good one-time exercise to see exactly what your monthly inflow/outflow is, then work on corrective measures, but that's about it.
Here's the big giant secret to financial independence: avoid debt, and spend less than you earn. Now send me $1,000.00
@geeniusatwrok: I disagree. Budgets that only look retrospectively at what you spend don't really work. Budgets that plan to put your dollars to work in specific categories and track that spending so you know when to stop do work. I've been using a budget spreadsheet called YNAB for over a year now, and it's done wonders for me helping understand, plan, and control my cashflow. I don't expect to set my budget and forget about it - I work with it as the month goes by.
@geeniusatwrok: Perhaps you mean to say that budgets don't work for you. I've been successfully using a budget for nearly a year now.
Or course it would be easier if Verizon FiOS could manage to bill me one consistent amount instead of me having to call them every month.
@ugly: Sorry to piggy back on your post, but: MINT.COM
An invaluable tool when it comes to budgeting. One drawback is that it only monitors online spending, however, you may link several bank accounts, loan accounts, etc.
Organized pie charts, ability to categorize your spending based on store or tags, etc. You get the idea.
Did I mention it was FREE?! :o)
@geeniusatwrok: Um, what? I keep a running, monthly budget and it helps a LOT. It helps me to keep WITHIN MY BUDGET and not go over, because I can see exactly what I NEED to spend each month, and approx. what I will have left over.
@geeniusatwrok: And how do you suggest someone spend less than they earn if they don't have a budget to determine how much they HAVE to spend (bills) and how much they have left over (for savings, etc), eh? Just go wily-nilly, by the seat of your pants and guess? Or ... maybe ... use a budget!
I'm just starting to budget seriously, but what was most useful for me to get my finances under control was to track my spending. I had a lot of CC debt (just paid it all off!!) and until I saw how much I was paying in interest every month, I was in denial about it. And it was hard to keep more than 2 weeks of purchases in my head. I'd mentally justify something that was probably a reasonable purchase, and then a few weeks later see something else worthwhile and forget that I had already spent my discretionary funds. It was only once a month when I paid the bills that I realized things were not going well.
So making an organized spreadsheet with some basic categories (loan payments, CC debt, rent, food, leftover money) was an important first step in reforming my spending habits, which were trending towards bad but not yet terrible. And now I have a good budget covering the basic categories, and a lot more discipline. So: whatever works for you. If a budget seems intimidating, it might be enough to start with keeping track of your spending. The tip about using old CC statements & bank statements to get started is great.
One thing that I did when I first wanted to see where my money was going was to pull out all those old Visa statements that everyone holds on to. I then made 12 categories and assigned each item to one (the final category being Misc. for all those miscellaneous expenses, and "baby" became column 13 eventually, who knew they'd be so cheap!).
I never really knew why I kept my old statements, but it sure paid off that day. It took me a few hours but it really did help and showed a great deal of consistency in our spending over the previous 2 years.
So for all of you that want to cut back in certain areas and if you kept those, have a look. It gave us a great head start.
Obviously, this doesn't cover cash purchases, but I've always used my CCs for everything I could for the rewards.