Who needs a budget?
Budgets are often viewed as necessary for those who are financially burdened or for the poor. However, budgets can and should be used by everyone, regardless of age or financial status.
What is a budget?
A budget is simply a tool that is used to plan spending and savings. You can think of it as a roadmap to navigating your finances. You wouldn’t even think of driving cross-country without first knowing which highways to take, so why do people think that they can just ‘wing’ their spending and expect to end at their desired destination?
Why do I need a budget?
Most people are ignorant of their spending habits—they simply know that the money is gone at the end of the month but rarely have an idea of where it went. A planned, well thought-out budget can not only help you identify potentially problem areas, but also help you plan for unexpected emergencies.
How do I create a budget?
A successful budget needs to have categories for all major expenses such as: Housing, Automotive, Debts, Clothing, Food, etc. Each of these categories should then be broken into sub-categories. For example, Housing can be divided to include Rent/Mortgage, Maintenance, Electricity, Gas, etc. These are then added to show the total Housing requirements.
Categories should also be set up for miscellaneous expenses that you typically don’t think about: The morning coffee and donut, daily newspaper, or that bottle cap collection that always has you looking for that elusive rarity. All of these need to be taken into account and planned for.
When you are planning your budget it is helpful to be aware of your spending history for each category, such as, knowing what your utilities typically run for in an average month. Knowing what you have to spend each month is half the battle; the other half is knowing what you can spend on the other items.