For some of us ladies that is a dirty word. Even for me whenever I think about having one I tend to cringe a little bit, but during these trying economic times in order to stay ahead creating a budget is an absolute necessity.
If you are living paycheck to paycheck, whispering a prayer while your credit card gets swiped in your favorite boutique, or stacking up overdraft fees, then a budget will definitely be your salvation. Even if you have a little something left over at the end of the month having a plan will help you be mindful of what you spend and may even add a little extra to your savings or to pay off debt.
Having a budget doesn’t mean you have to give up your social life, quit shopping or even deny yourself anything fun. What it does mean is that you have to sit down, look at what you make and figure out a way to live within your means without relying on plastic.
One of the first steps to take is rather simple. Pull out your pay stub and look at your net income. Some of us have this big number in our head and in the world of direct deposits and e-banking many of us never take the time to really see what we make. If we actually look, we may be slightly shocked to the see the number that appears after taxes, insurance, savings plans and benefits are subtracted.
Once you’ve checked out your pay stub look at your monthly expenses. It’s always good to start with your fixed ones such as rent, car payments, savings, insurance, debt and student loans. From there look at your other expenses that may fluctuate, such as your utilities, cell phone, cable, groceries, entertainment, etc.
A great way to get an estimate on what you are spending is to pull up your bank statement and look back over the past few months to see where your cash is really going. When I did that I realized that happy hours, dinner with friends, vintage shopping and trips to my favorite red and white box store put a dent in my expenses.
Now that you’ve gathered all this info take a moment and do some good old-fashioned math. Subtract all your expenses from your income and you will come up with either a positive or negative number. If you have a positive number you actually have money left at the end of the month. If you have a negative, I’m sure you already know that you are spending more than you earn. But the great thing about having a budget is you can recognize how you are overspending and turn that around.
Growing up I saw my dad do his budget the old fashioned way with a pen and paper, but now there are many software programs and resources online such as mint, LearnVest and bundle, where you simply plug in your information, connect to your accounts and they do the calculating for you. Some sites will even send email alerts if you go over the amount you allot for that area in your budget.
One of the biggest things budgeting will help you do is recognize the difference between needs and wants. Needs are your basic necessities like food, clothing, shelter, and basic transportation. Wants are things that we may dream about having but aren’t essential to our survival, like wanting shoes with a certain color sole as opposed to ones that may be more economical.
Looking at what you really need can help you trim several expenses. By evaluating my spending I eliminated extra cable channels (that I never watch), started packing my lunch daily and started taking care of some of my own beauty needs. I also cut back on dining out, and began using sites like open table, living social and groupon to find deals on my favorite places to eat. I even stopped buying as many books and started visiting my public library, which surprisingly had many new releases along with e-books.
Just by taking a little time out of my schedule to create I budget I now have extra money to pay down debt faster and increase my savings. I even created a splurge fund so that when something seems too good to miss I don’t have to destroy my budget to have what I want.