Somehow, you can’t work out where all the money goes. You’ve got a reasonably good job, and you don’t live in Beverly Hills, but your debts creep up and there never seems to be any money. The problem, probably, is that you are not using the “b” word. Getting control of your finances nearly always starts with a budget.
Chicken or Egg
It’s so difficult to know which comes first—making the budget or living by it. Logically it is obvious that making the budget comes first, but gathering the information you need takes time, and while you’re doing it the spending goes ahead.
Making a proper budget is a long-term process, but that doesn’t stop you setting up an interim one. One month is probably all you need to gather the information that will get you started. After that, you can make the first draft, although it will take at least a year to identify where all the money goes as quarterly, annual, and one-off costs are added.
Ins or Outs
For most people, it is relatively easy to work out what comes in each month. Being clear about what goes out takes longer. The more you pay by credit or debit card, the more information you have at your fingertips. Whenever you pay cash, keep a receipt or write it down in a notebook—nerdish but useful!
At the end of the month gather the statements and receipts, and analyze your spending into categories: groceries, gas, meals out, utilities, mortgage, savings, etc. Compare the monthly income with the expenses. If the expenses are greater, it is time to look for areas where you can cut costs.
Cash or Card
Once you have set yourself a budget, sticking to it requires constant monitoring. As you began in the first month, so you must continue for every subsequent month. If you can check each week how you are doing, so much the better.
Credit cards may seem like symbols of profligate irresponsibility, but they can be a real ally if you use them wisely. Every month you have a convenient list of your spending, which you can then analyze under headings. Some cards even do the job for you by assigning each payment to a category. With a shared account couples can keep watch over their joint spending. Try this website to compare available cards.
Cash still has its place. Its best use is to decide at the start how much money you can afford to spend on “luxuries” like coffees and lunches out. Put that amount in your wallet as cash and when it is gone, you stop buying until next month. It’s an effective way to get under control the money that can easily melt away.
Start or Delay
There is probably only one good time to start living on a budget, and that is today. Like many things, it seems like hard work to begin with, but by the time it has become a habit you will only notice the benefits.