How to Start a Budget

How to Start a Budget
Hi! This is Alfred on behalf of Expert Village. All right, let's get started. Creating a budget generally requires 3 steps. First you need to identify how you are spending money now, second you need to evaluate your current spending and set goals and take into account your long term financial objectives and third you need to track your spending to make sure that it stays in those guidelines. We are going to talk about identifying how you are spending money now. Budget math is simple. The amount of money going out must always be less than or equal to the amount of money coming in. Incoming funds are pretty predictable and documentable. Money going out however, may be a bit more difficult to document. Understanding and changing your spending habits is the key to successful budgeting. Get ready for some eye opening experiences when you sit down to evaluate your spending. Write down all your living expenses or mortgage payment, utilities, transportation, all sorts of stuff like that. The expense record that follows is a starting point. To make your budget work you need a record of where all your money goes. Keep a money diary everyday or week for a month. Document every purchase by getting a receipt for everything you buy. If you don't get a receipt, keep a notepad handy and record the expense. Keep track of how you pay for things to. Note whether you pay cash, use a credit card or write a check. At the end of the month fill out an expense record. For items that you pay once a month like a club membership or your car insurance payment, simply divide the payments by the number of months that it covers and write that amount on the monthly record.