Comedian George Carlin once had a stand-up bit about the seven dirty words you can’t say on television. While the word “budget” wasn’t one of them, it still ranks as a dirty word for a lot of people. In many cases, these are the people who wonder why they live paycheck to paycheck even though they have a decent salary.
If you’re ever going to get a handle on your finances, you really need to learn how to create a budget within which you can live. Now here, that last part is critical. Lots of people know how to make a budget; but they just can’t stick with it.
Here’s where you’ll learn how to accomplish just that.
4 Steps to Create A Budget You’ll Stick With
- Determine Your Take-Home Pay
It’s pretty easy to do, as it’s right there on your check stub every pay period. Sure, on paper you’re making $70,000 a year, but once all the taxes and other withholdings are calculated and subtracted, it might be more like $53,000. This is an important consideration. After all, if you’re living like you’re making $70k, but only bringing home $53k, there’s your problem right there.
- Audit Two Months of Spending
The good news is you don’t have wait two months to figure it out. All you have to do is go back and audit two months of your credit card and bank statements. Create a spreadsheet or a journal in which you itemize the outlays according to category. This will help you see where your cash is going each month.
- Assess Your Buying Habits
Step two is probably going to shake you up a bit. Most people have no idea how “little” expenditures like that Chai latte they buy on the way to work adds up over the course of two months. For the record, it can approach $200 if you’re buying one every weekday. Making it at home costs a lot less—and puts the difference back into your budget.
Your ultimate goal here is to free up 10 percent of your income for savings. To get there, go over everything and figure out what you can live without—while still enjoying your life.
That last part is what will make the difference. Living within a budget becomes a lot easier when you leave yourself some room to actually live. Rather than putting yourself on financial lockdown and going all hardcore draconian, give the player in you a bit of room to play—as long as you can hit the goal of saving 10 percent each month.
- Put It in Writing & Keep Track of It
It’s all too easy to say to yourself, “Ok, I gotta stop buying this and spending on that.” But when you try to actually do it, it’s difficult to hold yourself accountable with nothing tangible against which to review your performance on a regular basis. Keeping a ledger gives you a feeling of satisfaction because you’ll have visual proof of your progress.
If things have already progressed to the point at which you need help getting things back under control, the services of a company like Freedom Debt Relief can be very useful. They can help you reduce your debts to a more manageable level, which can make budgeting easier to do.
Ultimately, learning how to create a budget within which you can live is simply a matter of figuring out how much you actually have to spend, tracking where it goes and dialing your expenditures back just enough to help you hit your savings goal, while still enjoying your life.