Some time ago we talked about how you can assess your current financial health. If you missed it, you can always go back and review. Now, let’s move on to our next topic: today we will talk about how to create monthly budgets and get a hold of your own money. Well, shall we?
Where does your money go?
We usually understand how and where we spend our money, but where most of us struggle is that it doesn’t seem to reach as far as we think it should. The solution is actually quite straightforward – create and maintain a budget.
A budget is simply an itemized list describing all of your income sources and all of your expenses. This will let you determine how your money gets spent, which in turn makes it easier to meet the financial goals you set. Since we already had a look at your overall situation, you should have a pretty good idea on where you stand financially. The next step in mastering your finances is to make a budget.
What you need to know
To create a sound budget, you have to be aware of the following monthly numbers: your household income, expenses, and contributions to retirement or savings plans. Once you have them, head over to the calculator and enter everything into your spreadsheet. Print out the results.
Now you should have an idea about where your money is going every month. Most people are shocked to discover how much they spend on things like coffee or eating out. This week’s activity for success is trying to reduce or, even better, eliminate one of your monthly expenses.
On top of getting less coffee and decreasing the number of café visits, you can also get rid of the extra cable TV packages and disconnect that satellite radio you never listen to. Eliminating only $100 of your monthly expenses can make a real difference – that will be worth over $100,000 in 30 years!
For now, you can busy yourself with this week’s activities for success:
- Talk to your friends about your personal finances resolution.
- Fill out your monthly budget calculator.
- Reduce/eliminate one monthly expense.
We will talk more about long-term plans when discussing financial goals in our next article. Stay tuned for new posts and be sure to tell us about your budgeting experiences in the comments section below!
Still looking for more? Feel free to check out our comprehensive personal finance guide to learn more about managing your budget and staying financially healthy.
[Featured image credit: jridgewayphotography / Flickr, used under BY-ND, image cropped]