Set budget and financial goals
These should be short-term and long-term. It often helps to have something to be working towards to help stay on track with your budget. For example, if you want to save for a house, it helps to have that goal on your radar.
• Short-term goals include not spending more than a certain amount of money every month or saving a few hundred dollars every month. Short-term goals are often easier to reach than long-term goals.
• Long-term goals include being able to put down a mortgage payment on a home or a car, or begin meaningfully preparing for retirement. Because the fruits of our labor aren't seen immediately – they're often not seen for decades, in fact – long-term goals can be extremely hard to budget.
Make a list of what's absolutely essential that you pay for
These include essentials like rent or mortgage, electricity and heat, food and diapers, for example. Add all these items up and see how much of your monthly income is left after accounting for the bare necessities.
•If the bulk of your income is taken up by necessities, don't worry. There are always ways to tighten your belt, and also ways to make more money. The important thing is making a budget and sticking to it; this feat alone will help you start to rise above your circumstances.
•If you have some wiggle-room after accounting for your essentials, that's great news. Not everyone has that luxury. Begin thinking about how you're going to prioritise the rest of you discretionary spending.
Begin budgeting out the rest of your discretionary spending
This part of your budget is all about identifying values. What values do you have and how do you want to spend your money to realise them? Money, after all, is a means to an end, not an end itself. Are you going to use money to make it truly work for you?
•What sort of a person are you, and what do you like to do? The vast majority of people end up spending money on hobbies, interests, and callings.
Think of this as investing. You put something in (money), and you get something out (satisfaction, experience, etc.).
• Think about what makes you really happy. Scientists are slowly beginning to understand that people who spend money on experiences are actually happier than people who spend money on possessions.
That's because charm of memories lasts a lot longer than the temporary charm of possessions, whose novelty wears off relatively soon. Think about what experiences make you truly happy as you budget, and consider setting aside more money for travel and vacation than for material things.
Use software to help you budget
Personal finance software is quickly becoming a new trend in finance. These programmes have built-in budget making tools that can help customise your budget, along with analytics that help you project cash-flow into the future and better understand your spending habits. Personal finance software includes:
•Mint
•Quicken
• Microsoft Money
•AceMoney
•BudgetPulse
Source: www.wikihow.com
