Merely noting down how much money comes in and how much goes out can make a huge difference to how much control you exercise over your finances. There are so many different ways to track your finances as you can write it down on paper, an app or even a spreadsheet.
Expenses which are outrightly waste in nature such as overdraft penalties and late fees can be easily avoided if you develop such a practice. It can help you identify the areas where you can easily minimise the expenses and maximise your savings.
Following are certain steps that you can take to do budgeting in the right way:
Add Up Your Income
Determine the amount of income that your family earns after tax is deducted from it. If the income that you earn is variable and depends on the number of hours you work, you should take an average of the income that you have earned in the last couple of months. For this calculation you shouldn’t take into consideration the variable aspects of your income such as tax refunds or year end bonus.
Keep a Tab on How Much You Spend
Some expenses that you incur on a monthly or regular basis such as utilities, rent or mortgage, insurance, child care, car payments, gas, groceries, child care and access to Internet, TV and phone service.
You also shouldn’t forget to include payments that you make for loans such as home equity, student loan or outstanding credit card debt. After adding up all expenses you should understand if the amount of money that comes in is greater than the amount of money that goes out each month.
Take Little Things into Consideration
There are many expenses which are not significant enough to include into large monthly buckets such as the money that you withdraw from the ATM or that which you spend on your small daily needs.
By maintaining a journal of expenses for each month, you can keep proper track of where your cash is going and based on your findings you can predict the possible expenses for a period of time that is yet to come.
Expect the Unexpected
We often lay the blame of missing our budget deadlines on unexpected or unforeseen expenses. While it is true that sometimes it is impossible to predict certain expenses, it is also true that with a bit of foresight you can make room for some of them in your budget and prevent them from absolutely ruining your budget.
Take for instance, the money that you spend on buying holiday gifts for your child’s teachers or having to buy stuff for fundraisers. You can set aside a certain amount for these expenses in your budget.
Look for Items to Cut
Creating a budget should help you to find those expenses that you can easily curtail if you think that you are spending more than what you are earning or more than you should. These can include subscribing to premium channels that you do not generally watch or the expensive subscription to the gym or club that you seldom visit. You can buy clothes on sale, adjust your thermostat to minimise energy consumption and delay the buying of a new car if your old one isn’t giving you much pain.
Get High-Tech Help
In the internet age there are few reasons for you to stick to pen and paper and do all the math yourself. There are many sophisticated applications that make it easy for you to create a budget and also help you to keep track of it.
There are many personal finance websites and applications such as mint or programs like Quicken that have built-in tools which are of great use. By using these services you can track the incoming and outgoing of money, irrespective of whether they are big or small in amount.
Some of the features make real time adjustments and ask you categorise each payment that you make when you write a check, make a deposit, pay a bill or dispatch an electronic payment.
With the right use of the internet, it is possible to further cut down on expenses as it helps us to save more by offering cost effective alternatives for resources such as software, e-books or even services such as writing a Will using a free Will kit.