As you prepare to go into this new month, start by establishing a budget for every single dollar that you have. Whether you spend it, donate it, or save it, be accountable for it so that you know where your money goes and what you need to cut back on or even increase, like savings. Here are the 10 steps that you can take to develop your budget TODAY.
1. Put All of Your Bills on Your Kitchen Table
Examine each bill closely. What can you eliminate from your cable account to reduce the monthly charge? Can you make changes to your car insurance to make the monthly payment less? Has your cell phone company tacked on extra charges you didn't authorize? Can you request a refund of your deposit from your electricity company? Do whatever you can to save a few dollars a month. It adds up.
2. Set Up a Dollar for Dollar Budgeting System
You might be saying, Shantrell, how am I going to do that? I barely have enough money to live from paycheck to paycheck OR I don’t want a new system, the one that I have is just fine. Well, I get it, I do, but just TRUST ME. Try this out for six months and if you don’t like it, then you can go back to your old way of doing things. But if you like it, let me know so I can say I TOLD YOU SO :-).
3. Budget Before the Month Begins
Budgeting for the month BEFORE the month begins is extremely important. Forward-thinking is how you get ahead and ensure that your future is going in the direction you need it to go. When you use an app like Mint, you can set up your first budget in minutes. And going forward, you just copy the previous month over and change it where you need to.
4. Know Your Income
Alright, now you know when to budget, so let’s look at how to establish your budget. It is important that you know your income and how often you receive your income. Income is all of the money that you get during the month.
5. Determine Your Fixed Expenses
Once you have established your income amount and the frequency, you will need to determine your fixed expenses. Your fixed expenses are what you pay for every month that is the same amount, such as your rent, mortgage, and car note.
6. Determine Your Variable Expenses
Variable expenses are the bills that change from month to month based on your usage. These expenses would be your electricity, water, and garbage bills.
7. Budget Based on Your Month Events
Before the next month begins, pull out your calendar. Look at all of the upcoming events for you and your family where you will be spending money. These events may be an anniversary, birthday, conference, or holiday. You can then add those amounts to your budget for the month.
8. Budget for Your Goals
Where do you want to be, financially, in the next 5, 10, or 20 years? What about next year? Start planning the life you want tomorrow by setting money goals today. Once you’ve got these goals in mind, you need a plan to make them happen. Do you want to save money, become debt-free, invest in retirement? Then you need to make sure that you include these goals in your budget. That’s how you will achieve your goals.
9. Use a Zero-Based Budget
With a zero-based budget, you do not spend all of your money until you have zero, but what you do is allocate every single dollar somewhere. Your income should fit in your budget either in expenses or savings. This budgeting concept allows you to see your money dollar for dollar and spend it wisely. You will be able to start making your money work for you.
INCOME – EXPENSES = $0
10. Save Towards Your Goal
If there is any money left over after you have allocated every dollar, put that left-over money towards your money goal. This will help you reach your goal faster so that you can move on to the next one.