Steps To Budget Mastery!
The fact is, budgets are only as truthful and complete and as you make them, which means leaving a few expenses off here or there can leave you far over budget by the end of the month.
These are some great tips to help you be as honest and forward thinking as possible so your budget works for you rather than against you.
Create a Second Column
Not to be redundant, but we’ve got to first start with the budget. Why most budgets fail is because they only have one column, the budgeted column. We’ve already gone over why this doesn’t work. Instead, upgrade your budget to a two-column layout for success. Your first column is the “What I Think I Will Spend” column, and the second column is the “What I Actually Spent” column. Basically, you create two mirror columns to accurately display what is going on in your budget for a given month.
Fill in “What I Think”
The “What I Think” column should be the easiest column to complete and shouldn’t take you more than a couple of minutes at most. This column represents all of your budgeted items. It’s an approximation of what you think you will spend during the month. Most of the numbers should be easy to access from your normal monthly expenses. Don’t labor over this column too much, but make sure that you attempt to accurately itemize each income and expense item.
End of Month
The end of the month is where things start to get a bit more analytical (but don’t let that scare you). At the end of each month, print off your most recent bank or credit card statements in which you’ve incurred your expenses for the month. This is the easiest step in the eight-step process, but it’s critical to analyzing what went on during the month.
Add It Up
Once you’re armed and ready with your statements (and receipts, for cash spending), get out a handy calculator and some highlighters. Color-code your statements for budget expense items like groceries, eating out, gas, clothing, utilities, phone, and so on. Then go through the list and highlight each item in each category. This makes it easy to add it all up when you are finished.
“What I Spent”
Now it’s time to fill in the second column, “What I Spent.” Simply take the numbers from your statements and input them into the budget template. If you notice that you’ve left off a category on your budget, add it and put it in bold so it can jog your memory next month. Each month has its own twists and turns, so it’s common that you might leave out a category by accident.
Compare the Columns
You’ve done the heavy lifting now, and are almost through your 20 minutes this month. Take a look at your budget and compare the two columns. Are there any areas that surprise you? Did you come in under or over budget, and why? What about those missing categories, are they essential to include going forward? You see the power is in comparing these two columns. It gives you a chance to evaluate your budget from estimation in the beginning of the month, to an absolute at the end of the month.
– via Wise Bread
Be Aware of Fixed and Variable Expenses
One important rule to keep in mind when setting your ultimate budget is that not all expenses are created equal! There are some monthly or yearly expenses you can rely on to be the exact amount, each and every time, like your mortgage or car payments. But others, like medical expenses or home maintenance, can vary widely based on the situation.
Making sure that your budgeting accounts for the unexpected is one of the most important steps toward budget mastery that you can take!
When implementing a budget, it is important to understand the difference between fixed and variable expenses that you may incur during the year. Typical fixed expenses include your mortgage, life insurance, and car payment i.e. they should be the same every month.
Variable expenses are those that fluctuate month-to-month like your gasoline bill and entertainment funds. It is also best to set aside money in case you need to repair a household appliance. By staying prepared for the worst, you will be able to handle any and all monetary issues that may arise.
After you subtract your expenses from your income, you are left with a balance that can be put towards your savings account. If you are not left with any money at the end of the month, it’s time to reevaluate your variable expenses.
Atlas Appliances Ltd of Calgary recommends that one way to cut appliance replacement costs is instead of getting a new dishwasher, or washing machine you can have the old one repaired much more cheaply. Other tips include, downgrading to a lower tier with your cable company… Cutting back on eating out… Carpooling to save gas… Installing a programmable thermostat (or manually adjusting) to reduce heating/cooling costs… Eliminating your land-line phone or replacing with a VOIP phone like MagicJack.
– via Your Family Finances
Do you feel that you’ve achieved budget mastery? If not, what’s standing in your way?