One of the first steps into being green on a budget is to well…set a budget!
If you are new to budgeting, let me assure you that it is not as hard as it looks and is easy to stick with as long as you have the desire and the tools.
First, take an honest look at your income and expenses. Are there areas you can reduce your spending? If so, do something about it. Maybe you don’t need all of those extra cable channels. Have you tried to shop around for cheaper car insurance? Do you eat out too much?
Going over your monthly expenses with a fine toothed comb gives you the chance to make changes in your spending and also gives you the opportunity to start saving money for emergency expenses and other pleasures in life.
Debt is a bad thing. It keeps you from really being able to enjoy life. When you are in debt, you are a slave to the creditors you owe. But we will talk about debt and ways to reduce it in another series.
For now, let’s work with what you have, easy changes you can make and a budget you can live with.
In order to determine a comfortable budget, you need to take your net monthly income and subtract out your necessary living expenses (housing, utilities, car, insurance, etc.). Figure out which luxuries you are willing to give up and which you are not. For those you are not willing to part with, subtract them from your income. Now how much is left? Is it enough to feed your family and provide necessary household items? If not, you need to do some tweaking (get rid of some more luxuries). If so, than great! You have a budget to work with. If there is more than enough excess to feed your family, than set a budget and the difference goes into your savings.
Now that you have a budget, what do you do? In order to stay on budget, you need to be able to track your spending. There are many different ways you can do so. One way is to use the envelope system where you take a pre-determined about of cash and assign categories. Once the cash is gone, your spending is done for that period. Or you could create an excel sheet to track your spending. If you have an iPhone or Android phone, you could download a budgeting app to keep track of your purchases. Or you could even use the old fashioned pen and paper. Whatever method you choose is up to you. Just make sure it’s something easy to access and understand so you will be sure to keep up with it.
On a side note, I realize financial planners everywhere are probably having a heart attack over my method of budgeting. However, let me say this. I am not a financial expert. This exercise is for those beginners wanting to make good changes who have never even set a budget before. It’s a starting point and one I believe is easy for anyone to manage.
Next up? How to Use Meal Planning to Stay on Budget
