When it comes to personal finance, budgeting is a deal breaker. It could make or break your financial goals. Working on a budget at least once a month helps you get a good idea of how much you are spending and where you are going with your money. It allows you to allocate your resources and determine which items on the budget line you need to prioritize. It gives you an idea of where your current personal finances stand so you can make adjustments on your lifestyle, if needed.
Start your budgeting process with an end goal in mind. What is it that you are saving for? Are you aiming for something immediate or for the long term? Are you building a retirement fund? Are you saving money to spend for your dream vacations? Set your sights on your goals and work with them in mind every time you prepare your budget.
Review your money sources. Make a list of all your earnings from your job or investments. Take a look at the amounts coming in. Estimate how much regular income is coming in and make a separate calculation for the extra money that may be coming in from various works or investments.
Take a look at your cash flow. Understand and manage the flow of your money. Calculating your income is just part of it. You have to evaluate your expenses. List down all the payments you need to make regularly as well as all miscellaneous spending. Check all your financial statements and see which are costing you more money than you initially anticipated.
Put everything together and examine all the information you have. Review your income and expenses. Note the gap. Check how much you have enough left to save. Ideally, your budget should have a fixed amount for savings. If you are coming dangerously close to spending as much as or more than you are saving, you may have to start making the necessary adjustments. The goal is to minimize or reduce your spending and focus on how you can build on the savings you already have.
Be realistic with your budget. Avoid setting a budget that you will have a hard time following through. This will not only mess up the budget itself. It may also affect your financial goals. You do not have to make unnecessary sacrifices. Start slow and simple. Come up with something you can actually stick and not something you have to continuously adjust or fix.
Keep a record of your spending. Write down all expenses even the small ones that you may think will not have an impact on your budget. Review your record regularly. This will help you identify which areas you are doing well and which ones you may have to stop doing if you do not want to ruin your budget.