Most people know that budgeting is an essential skill for managing their money.
Unfortunately, most people still don’t do it or don’t do it correctly. But there are important reasons to budget and you should take heed of these reasons so you can begin budgeting immediately.
Know where you’re spending your money
The absolute first rule of budgeting is to know where your money is going. If you don’t know where your money is going, you can’t possibly understand where to cut back. You may think you need to cut back on buying clothes, but the majority of your money is going to eating fast food. So you reduce your clothing bill but still waste money on eating out.
Negotiate within your budget
The next thing you must do is outline the negotiable and non-negotiable items in your budget. This is especially important if you are in a relationship where both of you have input into the budget. Paying your mortgage is non-negotiable; saving to buy lottery tickets is negotiable. You need to have a clear idea of your priorities and outline these in your budget.
One of the biggest expenses for most families, especially those with children, is food. You need to budget in a certain amount for food per month and stick to it. If you are having trouble sticking to your food budget, follow these tips:
• Always use a list to minimize impulse buying
• Plan meals in advance so you have what you need on hand
• Buy in bulk
• Make your own bread
• Never shop when hungry as this will increase your desire to fill your shopping trolley with unnecessary items
Once you understand where your money is going, you will be better able to figure out where it should go. Write down a list of your income and expenses for the month. Then write down which expenses are essential and which are not. By the way, savings is essential. You will never be on firm financial footing if you do not save some of your money.
When you have decided on your monthly budget, give it a try. Do not be discouraged if you go over the budget the first time. A great, workable budget takes time to figure out and implement. Instead of beating yourself up about it, adjust your numbers and try again.
Budgeting is one of the easiest and smartest ways to become more financially savvy.