Too many people, budgeting sounds like a four letter word. It makes their stomachs turn, and it gets their heart beating faster. What does it mean to them? It means getting less of what they want and putting a lot more effort into it to do so. They think it is hard to budget. They think budgeting will make spending their money more complicated, and they think that their lack of a degree in accounting will make budgeting harder beyond compare.
Is it really hard to make a budget? It can be, but if it's done right with the right tool, it can be a breeze, and it can be just as easy to follow it. Before you start budgeting, you need to know how much money you normally make and normally spend on a regular basis. For most people, it's very simple to calculate income because they only have one salary, but also include any other income including interest on a savings account or CDs, dividends, capital gains, royalties, tips, and all other income. Next, do the same with your expenses. Write down everything you spend money on including your rent or mortgage payments, property taxes, utilities, food, car payments, your daily coffee, and anything else.
Total up these two amounts and subtract the expenses from the income. If this number is zero ro very low, you need to budget in order to save more and to get out of any debt you may have. If you get a negative number, that is very bad because it means you are going into debt. YOu are spending more money then you have and must be using credit to pay for it. This must be controlled. If you have a large positive number, that is great, but if you haven't bee budgeting at all, you can probably make that number a lot larger.
You can use budgeting software such as Quicken, you can use a spreadsheet, or you can just use a notebook and pen. All you have to do to budget is plan out where you spend your money and how much. Put a certain amount for food, rent, etc. Be as specific as possible, including how much goes to entertainment and other extra fun stuff.
Budgeting is not hard because it is actually meant to make things easier. Instead of worrying about how much you can spend, you know exactly how much. Also, you don't have to worry about running out of money for something important because you budgeted for it. Plus, you can adjust it however and whenever you want.
