Have you ever looked at your bank balance and thought, “Where’d the money go?” If so, you’re like most people, and could benefit from creating a budget. That way you’ll know how much money you’ve spent and where you spent it.
The first step in making a budget is to take some time to track your current spending habits. For the next month, keep a small notebook on you and track every cent you spend, be it a coffee for $1.59 at 7-11, or your new jeans that set you back $125. Alternately, if you don’t want to write it all down, keep your receipts and tally them at the end of the month. The only disadvantage of this way is that you must make sure to get receipts for all the money you spend, which isn’t always possible—you don’t get receipts from the laundromat.
At the end of the month, break down what you’ve spent into groups. Car, cell phone, rent, entertainment, food, loans, utilities, etc. Anything that you’ve spent money on this month needs to fit into one of these columns. Then, break down the columns. For your car, how much was spent on gas? How much on maintenance? For food, how much was spent eating out? How much on junk food? How much at the grocery store?
I did this last month and discovered that I’d spent $40 on junk food and $50 on eating out. That’s a little embarrassing. I spent roughly $80 on gas for my car. I spent $10 on renting movies. There were some areas where I was shocked by what I was spending, and others where I was about where I thought I should be.
Once you’ve taken a look at your break-down, you should have a pretty good idea of what areas of life need adjustment. Did you spent $240 on food just for yourself? You might want to think about cutting back dining out to once a week, or even less. You may want to focus on buying healthier foods and doing more cooking at home. You may want to make sure you shop when you’re not hungry, so that you’ll be less tempted by junk food.
Do you spend a lot on entertainment? Do you go out almost every night of the week? Do you spend $300 a month on entertainment? Look for different forms of entertainment that cost little, if anything. For example, take in the Art Gallery on an evening when it’s free, rather than paying that $8 admission. Rather than having five beers when you go out with friends, stick with one or two. You’ll still have your judgment intact, so you’ll be able to say no more easily. Have your friends over instead of going out. Rent a movie and have each person bring a snack. Much cheaper than heading out to the theatre where it can cost more than $10 a person, without snacks.
Once you’ve decided where to cut back, decide how much you can realistically afford to spend on things, without having to turn to your credit card to cover the balance. Then, write it down. Over the next month track your spending. Break each category down into weekly allowances, so you won’t be tempted to spend the whole lot at once. Again, keep your receipts or write down every cent you spend. At the end of the month, take a look at your spending. Does it match your budget? If not, where do adjustments need to be made? Were there areas where you spent money, but forgot to include it in your budget? Always create your budget with a bit of a surplus for unexpected expenses, because they will occur.
Budgeting can be more advanced than this, but on the whole, this is a good jumping off point and will cover most of your bases. Make sure your necessities are taken care of first, then your wants—and remember not to mix up the two.