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Budgets are a very helpful tool to track spending and meet personal financial goals. Setting one up doesn’t have to be difficult either. It can be as simple as setting aside a few hours at the end of the week and following a few guidelines. Not keeping track of your spending is a surefire way to overspend so use a budget as a tool to make sure you and your family can maximize your dollars! Here’s some help to get you started.
Set up a template
Excel spreadsheets can make this task very straightforward as they’re clean, organized, and easy to use. If you prefer using pen and paper or different software that’s perfectly acceptable however. What’s important is getting a clean view of your income and expenditures.
List all of your income items in one column and then all of your expense items underneath them. Set a heading for Income at the top of the list and another for Expenses beneath the last income item. This will help you from mixing the categories up. You want to create categories that are specific enough so as to track expenses appropriately without being too broad and lumping together items that should be accounted for separately (ex. grouping together electricity and water under Utilities). Group together items that can be managed together and separate items that can’t.
Once you’ve got the first column set up you’re going to create two more titled Actual and Budget. The fourth column will be titled Difference and in these cells you’ll subtract the Budget amount from the Actual amount to calculate the variance. This will let you know whether you’re overspending or underspending.
Tracking Income and Expenses
To track your income and expenses make a list of the documentation you need for each item and create a separate folder for storage. Income documentation you can use includes your Paystub, W-2, and Bank Statements. Expense documentation will include purchase receipts, bills, credit card statements, and the like. Use these to see the actual amounts you’re spending and not what you think you’re spending.
Other Helpful Tips
A few other things to be aware of. There’s no point in creating a budget if you don’t know what your goals are. Figure out what sorts of things make you happy and include them here. Create a discretionary spending limit so you know you’re enjoying the little things that make you happy. Budgets are live documents so feel free to adjust them every few months or so. Be honest with yourself when doing this. Remember to account for non-recurring expenses like auto insurance, member organization dues, vacations, etc. Save money every month and put aside an emergency fund for unexpected illnesses or costs!