If you currently are operating without a household budget you are not alone. In fact, studies have shown that two-thirds of Americans do have use a budget, so basically most of the population are on a spending free-for-all. That is pretty scary when you think about it. Money is stressful. Not only do you need to pay your bills, but have enough to provide for your family, not to mention have enough to live off down the road into your retirement years. It will take some work, but you can take control of your finances with a successful budget.
Take a Look at Every Dollar Coming In and Going Out
Now that you are looking to make a change, the first step will be to know exactly how much you have coming in and budget for paying monthly bills such as your mortgage, utilities, cell phone, and car payments. Make a list of every bill that you need to pay in a month, noting when it’s due, so you can make sure you have the adequate funds at the time you schedule the withdrawal. You don’t necessarily have to pay on the due day, it can be on or before, so try splitting up bill payments evenly across your monthly paychecks, so you have roughly the same leftover after each check.
Allocate Funds for Spending
After your bills are paid you can’t forget about other necessary spending such as food and gas throughout the month. Setting money aside for gas you can estimate based on the amount you drive in a month, but the grocery bill can get a little tricky and may need to average out the last few months.
Reduce Unnecessary Spending
It will take a little work but the only way you can reduce unnecessary spending is to take a look at what you are blowing your money on. Pull last month’s bank or credit card statement (try to use only one card for purchases to make it simple). Besides regular monthly bills, circle every purchase outside of that and determine if you could have avoided. Add up all of those charges and see what you could have had leftover. A good place to remove spending first would be going out to eat or buying single drinks and snacks at the gas station/liquor store.
Continue to Maximize Leftover Funds
If you are ending the month with funds left over, that is a sign of great progress. Technically if you come out breaking even you have a successful budget as you are not continuing to slip into debt, but you will want to continue to tweak your budget to ensure that you have money leftover at the end of the month that you can use to contribute to savings and retirement. If you create an emergency fund of at least three months’ worth of expenses, it will give you a nice cushion if you have an unexpected charge that would throw your budget out of whack by putting on a credit card. After that, all focus should be saving for retirement.