1. Budgeting Basics
Do you know why a budget is so important? On the surface it seems like creating a budget is just a tedious financial exercise, especially if you feel your finances are already in good order. But you might be surprised at just how valuable a budget can be. A good budget can help keep your spending on track and even uncover some hidden cash flow problems that might free up even more money to put toward your other financial goals.
The hardest part of creating a budget is sitting down and actually creating one. It’s like staring at a blank piece of paper when you need to write something and that first step seems like a massive hurdle. Don’t worry--I’ve broken down the budget creation process into a few easy to follow steps. You’ll be able to sit down and create a basic budget in just a few minutes.
Once you’re taken the time to create a budget, now it’s time to make sure you follow it. Budgeting can be like going on a diet—you start with good intentions, but after a few weeks or months you drift away from your plan. Don’t let that happen to you. Here are a few basic traits that will ensure budgeting success.
If you’re having difficulty coming up with all of the various expense categories for your budget, I’ve created a budget worksheet that can help you organize everything. This worksheet has the most common expenses and can help you keep track of everything in an orderly fashion.
The main reason to create a budget is to help you keep your finances under control by keeping track of how much money you’re spending and where it goes. When you begin to stray from your budget it’s usually because of spending too much money somewhere. But if you have a budget that tells you exactly how much you’re supposed to spend, why is it so easy to overspend? There are a number of reasons we overspend, so when you understand what causes overspending, you can help put a stop to it and keep your budget on track.
Swiping plastic has become incredibly easy. With both credit cards and debit cards, we can be in and out with a purchase in a matter of seconds. Unfortunately, this convenience comes at a cost. By using plastic we can begin to lose track of how much money is actually being spent. Sure, two dollars here, 4 dollars there, it doesn’t seem like much at the time of purchase, but if you aren’t careful they can really add up and bust your budget. One trick to help keep your daily spending under control is to use cash instead of your credit or debit cards. It might not be as fast, but it helps you visualize just how much money you’re actually spending.
So take these thoughts and put them into action!
From your Financial Corner
This article was written by Bank of America, Private Wealth Management Officer.