Knowing how to make the right budget is the first step towards financial freedom. It is so basic, yet so essential.

Failing to make an effective budget will ultimately leave you dejected, tired, and unwilling to carry it out the next month.

Today, I want to let you in on a few secrets, that will help you learn what budgeting should really be about. Not necessarily limiting yourself to the max, but instead, creating a safe environment where you can control your spending.

It’s really the same as eating, if you can control what you put into your body, and what you put in is meaningful and healthy, your life will see great results.

With budgeting, you will also see great results, and I’m not just saying this because I believe in it, but because I have seen it work in my own life.

There are 4 steps to Budgeting Basics 101, and each of these steps builds on the other. This will be a 4-part series  which I will continue in future posts. The first step is ultimately to get the basics down, and to understand the right way to actually make your budget.

Before you begin constructing your personalized budget, gather everything you can.

What to Gather:

  • Credit Card Statements
  • Bank Account Statements
  • Mortgage Documents
  • Utility Bills
  • Receipts
  • Debt/Loan Statements

Now that you have everything you need, it’s time to make your categories. Open up a basic Excel spreadsheet, or download a budgeting template, and using all of the materials you gathered, begin filling in values for each of the categories.

The values (such as $50 for clothing) will be on a monthly basis. So if you have all of your statements for February, construct a budget sheet titled “FEBRUARY 2012”.

In the top row, start filling in your categories. Here is a sample of what this will look like:

*Note: If you have large expenses that you pay, say, every 6 months or so, average those out over a monthly period. An example would be a $600 car insurance payment every 6 months. Dividing $600 by 6 months will give you $100 per month. That is what you will put in your spreadsheet.

This is a very simple example of what your budget sheet might look like, but you can create a budget to look however you want it to. There are all kinds of different ways to format your categories, headings, and values, but make sure you are not making it too complicated for yourself, because then you will be tempted to give up on it.

The important thing to remember in all of this is that you are tracking your spending.

Most people do not save enough and get themselves into debt simply because they don’t take the time to track their spending. They are too occupied with their every-day lives that they underestimate the importance of staying on track financially. Don’t let yourself end up in a situation where you are panicked, weighed down by the debt on your shoulders, and uncertain about the future.

Now that you have an idea of what a basic budget might look like, take the time to construct and create your own that is personalized to your needs. Give yourself a good hour to do all of this, and before you know it, you will be done with the first step!

Got a question on how to make your budget better? Leave a comment!

 

By: Erika Pizzo

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Budgeting Basics 101
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