Budgeting in 6 Easy Steps
Budgeting. The word alone sounds clunky, a little boring, and not a lot of fun.
““The person who doesn’t know where his next dollar is coming from usually doesn’t know where his last dollar went.””
But budgeting doesn’t have to be painful. In fact, it can be really interesting, and can certainly bring a lot of clarity and confidence into the lives of those who embrace the exercise of managing their money.
Part of having a budget is simply understanding where your income goes each month. If you’re finding you have an excess of dollars after paying for your life (rent, utilities, car payments, groceries, student loans, etc.), then congratulations! That excess can be turned into a savings goal, helping you to eventually buy a home, a new car, max out your Roth IRA contribution, or start your ever-important emergency fund. You control your money, telling it where to go and what to do.
Conversely, if you are spending more than you earn, money controls you. And that’s just not a great spot to be in. With a close look into your finances, you can get a clear picture of what your money is doing each month and year, then adjust accordingly. Remember: your budget doesn’t have to be perfect. In some months you’ll spend more than you’d planned, and others you’ll spend less. The point is to track and understand your needs, wants, and spending patterns.
We’ve put together a simple six-step budgeting tool to help you track and review your earning and spending. This exercise is easy, and we promise that you’ll find peace of mind after completing the steps outlines in the worksheet.
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The 6 Steps of Budgeting:
Step 1: Calculate your income.
Step 2: List your expenses.
Step 3: Separate needs from wants.
Step 4: Identify savings goals.
Step 5: Make a budget and categorize spending.
Step 6: Review, revise, repeat.