Budget is a word that can strike fear in some and complete confusion in others. To some it means failure and others it means success. No matter who you are and the reason for creating a budget, the most important tip for budgeting is being honest. Be honest about your money, not only with yourself but a spouse and or others affected by this budget.
The first step to creating a successful budget is getting honest about your debt. This means putting all current and pass due bills on the table. Don’t forget any collection notices or personal loans that might not have official paper work. Write all of these debts, payment owed and their due dates on a piece of paper. If the bill is past due or in collection, note the past due amount. You may total your debt if you’re curious to know. However, don’t let that one number prevent you from becoming debt free. If it will, don’t total it.
I do suggest a notebook for budgeting, however, you can use what you’re comfortable with.
The second step to creating a successful budget is getting honest with your income. On another sheet of paper write down all steady income to the household. Steady income is paychecks, disability checks and other income you receive every month on a specific day(s). At the bottom of this sheet, you can write down any additional income such as lawn mowing, babysitting or selling things to a consignment shop.
The third step to creating a successful budget is knowing how much you need to live. A need is something you can not live with out, such as water and toilet paper. A want is things you can live without like a new piece of furniture or a candy bar. Take a look at past receipts to get a good idea of what you need to live and how much it costs.
Steps one, two and three are the tough ones. Also, they are the ones that are the key to your success. It’s extremely important that you know your debt, know your income and know what you need to live. When you have honestly completed the first three steps, you are ready to create a successful budget.
In step four, you will need a budget calendar. Use a separate calendar from your day to day activities. If you don’t have one, create your own on sheets of paper. On the calendar, take your debts and write the debt on the calendar. Note the company owed and the amount. In another color of ink, write on the calendar when you are paid.
When you look at the calendar, now it should be clear which bills are due with which check. If you are paid on the first and fifteenth of the month. Anything due before the fourteenth will need to be paid with the check on the first. Anything from the fifteenth to the end of the month, needs to be paid out of the check on the fifteenth.
When you receive your check, pay yourself at least one dollar a day. Using the first and fifteenth example, out of each check you should be putting fifteen dollars into a savings account per pay period. If you are paid weekly, it’s seven dollars. Save at least one dollar a day. When your budget is moving along well maybe increase it to five dollars a day. You have to save money and one dollar is a start. Next give yourself money for your needs, only your needs.
With the remaining money, you need to pay your debts. With that calendar, you need to see that the bills until the next pay period are paid. If you are unable to pay those bills, you need to call the company before the bill is due and make a payment arrangement. Just remember, that will take money from your next check, make sure you can honor the payment arrangement. Any money after the current bills are paid, should be applied to any past due bills and bills in collections.
The key to successful budgeting is being honest about your money and debt. When you have a budget you can live with, living within your means becomes a little easier. Living within your means allows you to relax and not worry about money. With just a little hard work, you can be debt free.