Budgeting is something which many people struggle with because they were not taught how to properly appropriate their money on a monthly basis. Building a budget requires you to look at your expenses and compare it to your income in order to make intelligent decisions about your spending habits. The goal behind making a budget is to stay out of debt (or repay debt) and save money for future goals or emergencies.
Once you understand budgeting it may seem like common sense but for those who have never thought through the process it can be a revolutionary concept that can help arrange finances and improve your economic standing. If you are already familiar with the budgeting process and are simply looking for tips on how to improve your current system feel free to skip the next paragraph.
Every month you earn a certain amount of money and you spend a certain amount of money. The first step towards creating a budget is to find a reliable way to track both of those numbers (Mint.com is a great tool for this). Your goal is to make the first amount as large as possible and the second amount as small as you are comfortable with. There are two ways to accomplish this. You can increase the amount of money you make by taking on another job or finding another method of creating extra income. This is usually the more difficult of the two. The other way is to reduce the amount of money that you spend on items and activities which are not necessary. By reducing your costs you can create a surplus income which can be applied to a savings account.
For those who are looking for tools to help them organize their finances and create a first time budget the following is a fantastic place to start.
Everyone can benefit from checking out mint.com, which houses a number of tools to help you manage your finances. You will be able to track your expenditures and set goals for your earnings and savings, but the most impressive tool is it’s ability to analyze your spending and automatically create a monthly budget.
If you are looking for a much more in depth guide to managing your finances, The Total Money Makeover