Does setting a budget in 2014 sound about as exciting as getting a root canal? Fortunately, unlike visiting the dentist’s office, creating a personal budget shouldn’t give you the jitters. And finding the discipline to stick to a realistic budget can save you considerable money, as well as stress when bills and bank statements arrive.
Many American families need to reign in any unnecessary spending, yet according to many financial experts less than 40% of families set and stick to a budget. Naturally, many use the excuse that there’s no time or they’re simply too overwhelmed. That’s a shame, because the costs associated with raising children are substantial. U.S. News reports the average cost of raising a child in this country is quickly approaching $250,000! Many couples are even delaying having children in the hopes of first getting a better hold on their finances.
To demystify the process of personal budgeting, we’ve gathered these useful pointers to help you start saving more this year.
- Do it. Don’t let your personal budget become that household project you never get around to. The first step to any successful plan is putting it into action. Creating a budget while driving the kids to soccer practice isn’t going to work, so set time aside in your schedule and eliminate distractions. Tell your family when you intend to review the finances so your time is respected.
- Figure out what you have. In order to better assess your financial situation, gather current balances of all your checking and savings accounts. Look at how much interest you’re earning and what kind of banking expenses you’re paying. Knowing this information will help you determine whether you’re getting the best deal for your banking dollars.
- Determine what you make. For those on a regular salaried position this figure is relatively easy to determine for a monthly budget. However, for those with fluctuating income, determining your monthly pay is more difficult. Those who are in this situation are best advised to average the last year’s worth of paid work. And if this number still feels too high, you can set a number that’s even more conservative. Just be realistic, so you feel the work you put into budgeting is worth it.
- Look at monthly recurring bills. Nowadays, many of us enjoy paperless automated payments. But when it comes to budgeting, you need those numbers. And by taking a few minutes to look at your monthly recurring expenses, you’ll understand where your money is regularly going. Then if a better cable, phone or utility deal comes along, you’re more prepared to take advantage of it.
- Look at other expenditures. The key to roping in all other expenditures is to accurately determine the difference between your needs and wants. Once you’ve accomplished that, you can determine whether something you want is affordable based upon what your budget allows for discretionary spending.
- Determine your bottom line. Waiting to see whether you made or lost money at the end of the month isn’t a smart move. By having a budget, you’ll know your bottom line ahead of time. Keep in mind, as CNN Money recommends, set a budget that allows for 10% of what you make to go into savings.
- Stay disciplined. Once you’ve set a budget, the secret to making it successful is discipline. Like anything you work hard at, satisfaction comes from looking back and taking pride in your progress. And if you’re regularly tempted to purchase things impulsively, a disciplined sense of spending can be a lifesaver.
Remember: no matter how overwhelmed you are right now, you’ll feel better once you’ve made a personal budget. So go ahead; you can do it!