The New Year gives you chance to make a fresh start, as in “out with the old and in with the new.” And a good place to begin with a clean slate is with a budget.
Knowing where your money is coming from and where it’s going is a great way to restore your financial health. If you already have and maintain a budget, kudos to you! But if you’re like many people, having a budget isn’t high on their list of priorities.
Yet if you really think about it, it should be. A budget helps you learn how to live within your means. It provides a financial blueprint for the present and the future. And it teaches you financial discipline.
So where do you start? The first step is to track your spending. Whether it’s on a daily, weekly or monthly basis, it’s important to record everything you spend your money on. This will provide a baseline going forward.
There are essentially two spending categories – needs and wants. Your needs include food, transportation, housing, utilities, insurance, and clothing. On the flip side, things you want but don’t necessarily have to have range from going to concerts to eating out to weekly outings at your favorite watering hole.
To get a true appraisal of where your money is going, you’ll need to record every dollar spent. Yes, it’s going to be a time-consuming effort, but at the same time it’s going to be enlightening and educational. And you might be surprised at just how much you devote toward nonessential items.
Once you’ve accurately tracked your spending over a set period of time, it’s on to the next step – analyzing your spending patterns and creating a realistic budget. Look for helpful insights to get you headed in the right direction next week.