Learn to Budget Your Expenses

The word “budget” gets tossed around a lot, from the mom who tells her teen that a new gaming system is not “in the budget,” to the school officials who moan that “the annual budget was cut”.  How to budget effectively, however, remains a mystery to many people.  Their financial records are a bewildering jumble of wadded up gas station receipts, credit card statements and check stubs.  They have about as much idea of how to budget effectively as they do how to teach their cat to sing an aria.  Learning how to budget effectively is not terribly hard, but it does take a little time to sift through all your spending records and track where your money goes.

 

If you do not know how to budget, the first thing you need to do is to gather up all of your receipts, billing statements, loan records and cancelled checks—anything that will show what you have spent money on in the past few months.  It is a good idea to go back at least six months in order to get accurate figures.  As you begin to see categories where your money goes regularly--eating out, transportation and medical expenses--you can create a chart of columns.  You will probably come up with many different categories. Add up all the expenses, category by category, over the months in question.  For instance, take all the gasoline figures for the past six months, tally them and divide by six.  This number should be a pretty good average to budget for gasoline expenses each month.  That is how to budget effectively the amount for each category.

 

When you have an average for every category, get a total of all the averages and compare it to your monthly income.  Hopefully, the total will not exceed your take home pay.  If the total does add up to more than you bring in, you will need to make some adjustments.  Sadly, that is part of learning how to budget.  You need to be able to look at your spending honestly and locate unnecessary items that could be cut out or limited. 

 

Now that you have a basic understanding of how to make a budget, you have no excuse to put it off any longer. A good, working budget is something to be proud of.  Take control of your spending today.

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