Making a Budget: The Basic Steps
A great way to start living a frugal life is to plan for it. And when it comes to finances, the most important plan is a budget. Setting up a budget is possible no matter what you income, how you get paid, or what your current financial situation. Developing a budget is the first (and most crucial step) to becoming frugal. Here are some great tips on how to do it:
1. Keep track of your spending. You need to know what your current spending habits are before you can adjust them by means of a budget. Bring a small notepad with you wherever you go and note how much you spend every time you make a purchase. That way you can track your spending.
2. List out your expenses. This will include monthly bills as well as the money spent that has been written down in your notepad. Organize the purchases you have made into categories and then total them up to see how much you have spent.
3. Write down how much money you make and how often you receive it, whether that be on a weekly, bi-weekly, or monthly basis. Then total up how much you earn.
4. Write out your budget (based on the last month that you recorded). Compare that budget with your income. If you have more going out than coming in, then it’s time to make some changes. You can either cut your expenses or you can make more money.
5. Take some time to think about the budget you have planned. You might find some that some changes need to be made. For instance, if you tend to watch a very small amount of TV each week, you might decide that you don’t need to pay for cable each month. If your closet seems overly full, plan to shop less.
6. Once you have cut out all possible expenses, look at your budgeted totals for earnings and spending. If you still wind up spending more than you earn, you might consider getting a better or second job. Your budget will not be able to help you save money if you plan to spend more than you earn.
7. Review your budget. Since our lives are in a constant state of flux, your budget will no doubt need to be adjusted from time to time. As your lifestyle gets progressively more frugal, you may notice more expenses that can be cut.
Having a keen understanding of your own spending habits will enable you to live frugally, successfully. Making a budget and sticking to it is an essential first step.
