Starting a budget is an activity that many dread and put aside but fully understand the power and benefits.
It’s often difficult to start a budget because items and services you want now are always readily available; the temptation to go after these items is right in your face and by the time you’re done with them you’re left with buyer’s remorse.
If you’re serious about starting a budget you must first get into the mindset that you’re going after the bigger goals in life.
Once your mind is set, use the following steps to achieve whatever you want through budgeting.
Step 1: Identify your money “vampires”
First off, you’ll need to identify those items that are sucking away your expenses like vampires; these items are often that coffee in the morning, stopping for lunch during work, going out to eat more often than you should or buying that gadget you don’t really need.
Write down everything you have bought over the last month and set a small check next to each on whether it was actually essential. Once you can determine what you’re actually spending your money on, you can begin to set up an effective budget.
Step 2: Set up goals
Next, simply telling yourself that you want to save money and have a budget won’t do it, you need a goal. Without a goal, you’ll be tempted to spend money because you don’t have an end in sight. Pick a few things you’ve always wanted to own or do in life and write them down on; you’ll be working out how to obtain them in the next step.
Step 3: Create a budget plan
Now that you’re in the right mindset, identified where your money is going and have your goal in mind, it’s time to set up a plan to obtain them. With all of your money accounted for, figure up what your actual necessities are such as rent, utilizes food, gas, etc. Then, take the extra money you have leftover and divide out a considerate portion to go toward your goals but also remember to leave some money aside for emergencies and “fun” money.
Step 4: Open a simple saving system
You don’t necessarily need to open a savings account but it will help. You could go old school and start with an envelope system for each day of the week. The point isn’t about what actual system you chose it’s that you use it. Setup your own budgeting system that restricts you from going over each day on expenses you don’t need; always remind yourself that money you save is going for your goals.
Step 5: Invest in big-ticket items (of value)
Finally, when you’ve hit your milestones in budgeting and saving, you’re ready to go after those big-ticket items. When you buy quality items, you not only save money in the long term because they have more value but you protect yourself from the degrading value in case you want to resell them.
Always invest in items that assist and not things you have to continually dump money into unless you want your budget to be eaten away one item at a time.
Over time, investing in big-ticket items will allow you to set up budgets that don’t require you to perform normal maintenance thus giving you more room to continually reinvest into your goals, driving down your budget and setting yourself up for a financially secure future.