Budgeting has become one of those words that we dread to even think about. However, budgeting is one of the most basic important skills that all human beans must have. At MyFinancialBook (MFB), our goal is to take the pain out of budgeting and start to reward you for your efforts to stay within a budget.
Our system offers easy to use personal categories that show you where your money is being spent. Just simply knowing where your money is going will allow you to start saving. It is a simple step.
Knowing HOW TO BUDGET is such an important tool in our daily life. If we can master this skill of knowing how to budget then we can break free of the bonds of financial burden. Many people have entered into debt taking away their discretionary income.
We have created 3 steps to help people understand how to budget. These steps have been created to show the process one must take to improve their financial situation. We hope that these steps help.
Now the 3 steps for knowing how to budget are:
STEP 1
Evaluate what you are currently spending and how much money you are currently earning. For some people this might be very hard. Look at your credit card statements, checkbook or bank statements, and if you have them your receipts. Then add up all the areas that you have money coming in like your job, rental property, or a home business. Take your expenses and subtract them from your income.
By doing this step it is going to give you a general overview of how you are doing. If you are spending more or close to what you are making then there is going to be some trouble. This step simply gives you a general knowledge of how you are doing.
If you don’t have this information available to you then start to track it. You can use MFB as a great tool to track your income, expenses, and savings. Click here to create a free account!
STEP 2
Group your expenses into categories and set goals. We suggest no more then 12 areas. The reason that you want to have these categories is because you will then know in general what areas you are doing well in verses those that you might need to improve in. For example the Thomas family spends there money in the following areas each month: Mortgage - $1500, Utilities - $300, Transportation - $1300, and Entertainment - $300. One month the Thomas family sees the following when they log into MFB: Mortgage - $1500, Utilities - $300, Transportation - $1300, and Entertainment - $350. This is a simple way to start to diagnose what went wrong. Maybe it was necessary for the Thomas family to spend 50 more dollars during this last month. But now they know immediately where they need to go to find out.
By categorizing your spending it allows you to sort out your spending. This permits easy observation of problems. It can also allow you to make target goals that you can work toward. Maybe the Thomas family had previously been spending $500 a month on entertainment.
By setting a goal of how much you are planning on spending during one month you will have better direction and a plan of how much you are wanting to live within.
STEP 3
Actively track every penny and evaluate at set intervals. This is a continuous step that at first may be daunting. However, not only is it a very important step, it becomes very fun. There are two critical reasons that this step is so important. First, you will have an accurate knowledge of where your money is going.
Second, evaluating at intervals will allow you to know where you are on your plan. We have already talked about some of the benefits that evaluation gives. Some benefits are knowing where your money is going, seeing progress as you start to achieve your goals, and simply understanding the importance of living within your means and actually accomplishing that.
Summary
Learning how to budget is very important and the most important part is to start a budget. It might not seam fun at first, or may even feel overwhelming, but as you start your budget it will become more like a game as you try and limit your spending, stay within your plan, and start to succeed financially!