1. Track Your Spending
The first step in creating a successful budget is figuring out where your money is going. While this may not be an issue for essentials like gas, groceries and rent, you will likely realize how much of your income is going to non-essentials. Tracking your spending will also help you determine how much money you need to set aside for each category of your budget.
2. Make an Expense Calendar
It’s easy to forget when bills are due, especially if they’re auto drafted from your checking account. Set up a calendar with the dates that bills and other expenses are due or come out of your account. This is also a good spot to keep track of special events or upcoming holidays that may incur extra expenses.
3. Set Goals
Setting a budget is a form of discipline and let’s face it – discipline isn’t fun. However, it’s much more satisfying when paired with a goal. A person who wants to start running usually sets out with a goal of completing a 5K or training for a marathon. It works the same way with your finances. When you’re feeling the effects of your tight budget, you can have the motivation of knowing that you’re working towards something great, whether it be padding the savings account or paying off a debt.
4. Save First
To effectively save money, it has to be made a priority. Include a savings category in your budget and set it aside first.
5. Separate “Wants” from “Needs”
This is the most effective task in creating your budget. Sometimes our wants feel a lot like needs, but it is necessary to discern between the two. Focus on financial priorities first and if there’s room in the budget after that, set aside some fun money.