The following is a guest post by Lisa @ Frugalist, a personal finance blog that brings you money-saving strategies and frugal living tips
Creating a budget is the best way to stay on track with your expenses – and to help you save money. Living a frugal lifestyle starts with a plan after all, and your budget is that plan: it’s your goals, and your history manifested in one place. Never underestimate the power of a budget!
The Traditional Way
If you are using paper and pen, a spreadsheet, or a no-frills program of some type to make your budget, you’ll want to pay attention to the key word in this subheading: traditional. Many budgets aren’t quite as “automatic”and high-tech, but that doesn’t mean they’re less valuable; traditional budgeting techniques have their own advantages. Here are the basic steps to creating a traditional budget:
- Beginning Steps: You should have an idea of the numbers that will go into the budget. Take a few moments to identify the down and dirty numbers that will be in your budget – your car payment, house payment, insurances, income, and any other debt. Write them down for easy implementation.
- Categorize: Start making categories and subcategories for all of your expenses (and one or more for income). For example, you might include “fuel,” “insurance” (or in one “insurances” category), “payment,” and “miscellaneous” in the “car” category alone. Do the same for food, entertainment, savings, and so on.
- Format: Depending on your method, you’ll need to put everything in the right format. Most budgets will be month to month, so you might want to plan for this progression. This will allow you to look back at previous months to see how you are progressing.
- “Others”: As this is a simple guide to creating a traditional budget, there are “other” items that you’ll need to approach. Make sure you’re integrating everything finance-related in your budget, such as investments and short-term and long-term goals. You’ll also need to backup the budget in some way, just in case something happens.
Many people prefer to use more modern ways to keep a budget. You can easily get a free, web-based program to use on your computer. Mint and Adaptu are two easy to use options. Also popular are the budgeting software programs, like Quicken or Turbo Tax. Alternatively, you can choose a strong and interesting option in the form of a mobile device app (smartphones, tablets, etc.) Many of these programs and apps are extremely simple to set up: after entering the categories and limits, you are ready to start entering transactions as they happen. The nice thing about these programs is that so many options are automated, such as reports, graphs, charts, and other items, which are created for just for you.
Whatever your choice is in this arena, make sure you find a system that works. Some apps and programs are extremely involved, allowing you to enter all transactions for every account you have (credit cards, checking accounts, investment accounts, etc.). You might opt for a simple budgeting app on your smartphone where you simply enter what you buy and compare it to your income.
Overall, creating a budget isn’t too difficult. Regardless of your method, find a way to keep everything that you want to track in order. As you begin to keep you budget, you will likely show several items that can be approached in the goal of saving money.
Do you use a budget plan? If so, what’s your method? Have questions about creating a budget? Ask them here! Leave a comment below.