Creating a Budget Series: Getting Started

Spending your money is easy. Saving your money - not so much. But budgeting...where do we start?

We have all done it. No one really survives these days without actually allocating a certain amount for an item and still leaving something out for savings. In these times, with rising prices for everything, this sounds almost impossible. What’s comforting is your mother and father did it, your grandmother did it, your ancestors 3 generations back might have done it. Unless you might be super wealthy and budgeting for a polished yacht, you won’t be here reading this.

Basics of Budgeting

Budgeting is important because it gives you an idea of how much is coming in and out of your piggy bank or bank account. Knowing what you are spending on can be eye-opening and many times realization hits hard. Creating a budget and sticking to it can encourage you to save and reach your short and long-term financial goals.

But first, if you are new to budgeting it is important to know the basics. Let’s take a look at the fundamentals of budgeting that identifies each of these terminologies:

• Fixed expenses are expenses that stay the same from month to month, such as rent.

• Flexible expenses are expenses that change from month to month such as utility bills

• Total expenses are the combined amount of your fixed and flexible expenses.

• Total monthly income is the income from your job or other resources including investment dividends, pensions, Social Security benefits, rental income, and others.

• Disposable income is the money you have leftover after you subtract your income taxes from your income.

Get a paper and pen, and if you want you can get an excel sheet for this.

• Step 1: Create 2 columns for your budget planning sheet

• Step 2: List down your weekly income on 1 column and get the total

• Step 3: List down all your fixed and flexible expenses on the other column on the other column. Do not forget to add an item for savings.
  

5 Guide Questions You Can Ask After Listing Down Your Budget:

1. Subtracting column 2 from column 1, how much is left?

2. Is the total in item 1 enough for your expenses?

3. Looking at column 2, which has the biggest amount? Is this something you can lower?

4. What can you get rid of and/or spend less in column 2?

5. What can you add in column 1?

This method may not make you rich but it will certainly help you get a clear picture of your financial status. It is the simplest and most effective way to rethink on how you can save up for something or know what you can only spend when going out with friends without breaking the bank. Knowing where you are is the only way to know what path you are going to take and improve on it.

If you have no time to keep track of your inflow and outflow of cash, keep Carolina Money Minders at hand for your financial decision making needs. From bookkeeping, daily money management, and lifestyle management, Carolina Money Minders can assist you in handling your finances.

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