Budgeting is really the only way you can have full control over your spending. The best way to start is to evaluate your current spending and create long term and short term financial goals.
As you probably already know, setting up a budget is very important and can greatly help you:
- Avoid a financial crisis
- Achieve the peace of mind that comes with being financially secure
- Build wealth
Tools for Budgeting
The least expensive tool for setting up a budget is the old fashioned way - a pen and notebook. It can be readily available to you at anytime and it doesn’t require you to have to pay for expensive software. The downside to the old fashioned way it can be lost or damaged. It is also much more difficult to track spending and savings for the long term.
Probably the best way to budget these days is to use software. If you are similar with Microsoft Excel, then you can easily set up a budgeting spreadsheet on there. Personally, I recommend using financial software. Mint.com offers a free account that allows you to easily set up and organize your spending and budgeting. Another great software is Quicken 2013 which also has a mobile app and all the tools needed for setting up a budget.
Tips for Budgeting
- Track Expenses – The most important thing to do when budgeting is to keep track of every expense, even the small ones. The easiest way to do this is to use a mobile budgeting app, but you can also keep your receipts and add everything up. Be sure to document your expenses by the item and not the store. This will allow you to categorize your expenses much more effectively so you can see where your money is going each month and make necessary adjustments.
- Planned Expenses – Document all of your planned expenses for each month such as cable, car insurance, rent, mortgage payment, etc. You also need to estimate and create targets for variable expenses such as groceries, utilities, shopping, etc.
- Allowance – Give yourself an allowance for things you enjoy. This way when you go our to dinner or go shopping you will be in control of your spending and you will not feel guilty for buying things you enjoy (as long as you meet or stay under your allowance)