By Jen Wittkopf
Published: May 8, 2008
"Budget." Just the word can send shivers down a person's spine. But fear not, dear reader, by putting a simple plan in place, you can take away some of the unnecessary money worries that may be keeping you up at night. Like anything else, the more you know about where your money goes, the more you'll feel in control. At its core, a budget is simply a tool for being conscious of where your money goes. It's a healthy spending plan designed to help you achieve your goals. Take the first step to financial health here:
Three steps to a better budget.
- Tracking matters. Grab a notebook or create a simple spreadsheet. Simply make two columns: one for income and one for expenses. Then write down every penny you spend, from gas tank fill-ups to vending machine snacks to property taxes. By the end of the first month, you'll get a good sense of where your money is going and whether you're spending it on things that truly matter to you and your family.
- Divvy it up. Now that you know what you're currently spending your money on, separate it into two distinct piles: fixed and discretionary expenditures. Fixed expenses include mortgage or rent payments, car payments, utilities and the like. The rest of your money is going to discretionary spending, such as personal care items, gifts, dining out and clothing.
- Create a plan. Here's your chance to live with intention. Whether you're saving for a new home, looking forward to a vacation or are building your nest egg, you can look at every expense and decide whether it's getting you closer to your goal or leading you in the wrong direction. Only you know which expenses can be cut and which are "off limits" in your household.
Perhaps fewer lattes each month can add up to a longer vacation this year. Or, if you love your lattes, you can cut back on dining out. In short, decide which expenditures add value and meaning to your life. And remember to tweak your budget as needed. A new job, moving to a new city or having a baby can change your financial plan drastically.
With the right approach and a positive attitude, living on a budget -- your budget -- doesn't mean giving up the things you love. Rather, it means living life on your terms.