How To Create A Budget
The art of learning how to create a budget is exactly that. An Art. Though the task of learning how to create a budget may seem herculean at first, i’m here to help you break it up into bite sized pieces.
Most people do not know where to begin when it comes to creating a budget. This often translates to the perpetual non-existence of a true budget.
Yet, a budget is by far one of the most critical financial weapons you need.
Proper money management, aka, how to live on a budget, can be the gateway to a more fulfilled life. The better you manage your money, the easier it is to dictate or at least steer the trajectory of your life to achieve your best dreams.
Not sure how you found this article, or where you currently sit on the finance spectrum. I do understand that regardless of whether you are a shot-caller looking to diversify your impressive portfolio, or on the brink of moving into your mom’s basement, I’ve got something for you that we can all relate to.
Read on for the full gist on how to create a budget that’s timeless.
Table of Contents
Make Sure Your Budget Precedes The New Month
Have a plan for the month – before the month begins. This way you’re not always on the defensive, finding yourself against the ropes taking a beating.
In planning how to create a budget, go on the offensive.
Be Realistic With Your Budget
Your budget should match your income.
Clearly identify all viable sources of your monthly household income and aggregate your expected income figure. Tailor your budget to match the funds you are reasonably assured of making during the month.
Understand Trends and Events
Prior to the beginning of a new month, know well in advance what the month holds in store in planning how to create your budget.
November for instance, apart from being thanksgiving month, may be the month for all your Christmas shopping. Think about huge events (like Christmas) that would affect your spending habits in a particular month and plan ahead.
In learning how to create a monthly budget, ensure there is ample room in your budget sheet to cover these occasional expenses.
Include Life Long Goals In The Budget Picture
Ask the question – where do we want to be in 5 years? Then 10 years, 20, and so on. Are you building an emergency fund or saving for retirement? Be sure to tie in all these goals into your budgeting picture.
Be sure your budget includes answering those questions with actionable steps.
Just as you plan for monthly bills, outings, events, groceries, giving, etc., plan for where you want to be in 15 or 20 years, depending on what your own tailor-made goals are, and include putting aside for those goals in the budget spreadsheet.
Identify Budgeting Pitfalls And Avoid Them
Some of the pitfalls or errors made when it comes to budgeting are listed below. Be sure to be on the lookout for these and definitely avoid them.
Not Having A Budget In The First Place
The first step in budgeting is creating a budget in the first place. This is half the battle and sadly, most of us do not even get this far.
Without a budget template or budget worksheet, you have no idea where your money is going.
Fortunately, there are lots of free budget templates and tools available at your disposal online which you can begin to leverage as soon as today, and implement your very own budgeting plan.
And no, budgeting is not something only those struggling financially should be passionate about.
Even if you are comfortable with your current financial state, you need a budget worksheet. Change is imminent, and without a plan, your finances are not truly secure.
Having a budget is step #1 in handling your finances.
You’ve probably heard that one of the biggest problems with going on a diet is, you eventually go off the diet.
Having a budget cannot be something that happens in the fist quarter of the year, or a new year resolution that lasts 4-6 weeks and fades away. To make a difference, all your budgeting habits have to be a way of life.
The new, financially savvy you, has to be fully bought in to budgeting on a permanent and on-going basis.
Avoid the pitfall like a plague, of lacking the discipline to set a budget in place and stick with it.
Aside from the above pitfalls, also avoid the error of creating a mismatched budget. Your budget template should be tailor-made to match your lifestyle and that of your family if you have one.
Finally – Take Charge
Be the boss of your finances. You have to be the money CEO in your own home and, creating a budget that you can stick to is exactly the way to take charge.
There will be ups and down in the budgeting process, especially early on. It is important to know that budgeting is not a destination, but a process. A lifelong process.
Like changing eating habits, rather than getting on and off diets, budgeting in changing your outlook on your finances and having a whole new perspective.