Do you consistently run out of money before you run out of month? Are you struggling with debt? Are debt collectors harassing you? Do you feel as if your finances control you rather than you controlling your finances? Then your answer just might be … a budget.
Why a budget?
Every company in America has a budget. It’s the only way they can know where they stand financially. The same is true for us consumers. The only way we can know where we stand financially, where our money is going and how to control our spending is with a budget.
It’s not rocket science
Making a budget is not rocket science. All that’s required is that you track your spending for about a month and then organize it into categories. Of course, you could be shocked at what you learn. You might have been coasting along, thinking that you’re spending only a hundred dollars or so a month on entertainment only to find it’s costing you more than $300 a month.
How to make a budget
Once you know where your money is going by category, it’s relatively easy to make a budget. You could do it on a spreadsheet, on your computer or with your smart phone. There are a number of programs and apps that make budgeting just about drop dead simple. One program that’s available for use on your home computer or smart phone is called Mint.com. It will not only help you create a budget but can show you exactly where you stand financially at a glance. If you go over budget in any category, it will even send you an alert by email.
In addition to Mint, there is PageOnce Money & Bills, Duck Software’s Budget Tracker, Xpenser, PowerWallet and many more. Most of these apps are free or cost less than two bucks. Many work on both the iPhone and Android-based phones. All you really have to do is go online, search “budget apps” and then choose the one that would seem to best meet your needs.
Where to make cuts
Learning where your money is going is only half the battle. The next step is to see where you can make cuts to get your spending and finances back under control. Of course, the first step is to reduce your spending to the point where it’s less than your earnings. This just takes simple math. If you total up your spending and find that it’s $500 a month more than you earn, you need to figure out how you can cut $500 in spending. The categories where most people find it easiest to cut costs are groceries, clothing, and entertainment. You might also be able to cut your transportation and housing costs although these usually take more work and more time.
Think of your budget as a game plan
The primary reason why people give up on budgeting is because they created one that is unrealistic and too restrictive. Here’s an example of what I mean. Let’s say you budgeted $300 a month on groceries but have been consistently spending $400. Instead of giving up on your budget, just make adjustments. You could change that $300 to $400 and then find some other areas where you could save $100 to make up the difference. The important thing is to stick within the total amount you budgeted for the month but be flexible in terms of your categories.
When budgeting is not enough
If you’re really in a world of dead hurt, budgeting will only get you some of the way back into financial freedom. You might have to compliment the budget by getting a debt consolidation loan, through consumer credit counseling or by settling your debts. Many families have chosen debt settlement as it represents the only way to get debts reduced instead of just moved around from one set of creditors a new one.