As we grow from children to teenagers and young adults, we are taught many things by our parents and school, but the one thing the vast majority of people are never taught is how to budget money. Unfortunately, this is the one skill that everyone needs to know. Maintaining a proper budget and keeping track of what your money is doing is the best way to avoid debt and build wealth.
Money is a powerful tool in life, if we learn to make it work for us. Most people work for their money, but once they have it, in their paycheck, most of the time they don’t keep track of it once it hits their checking account. Putting expenses in your checkbook register is not keeping track of your money because once it’s written there, you never look at it again.
Learning to budget your money is an important step in your financial health. Once you’ve written down your income and expenses, you’ll begin to see where your money is going, and some of it may surprise you. It will be the small expenses that add up the fastest. Spending five dollars on lunch every day, or that morning coffee on the way to work, can add up to several hundred dollars a month. That’s money that could be doing more good if used more wisely.
Let’s put some math to that. If you spend $5 for lunch a day during the work week, that’s $25 a week or $100 a month, plus or minus $5. Over the course of a year, $1,200 is spent on lunches. If you start adding up all the other small expenses that happen each month in no time, you may have enough to pay off any debt you may have, but also start saving for a healthy financial future.
The first step in learning to budget money is to write it all down. Start with your monthly income and write it down at the top of a piece of paper. Now you know how much money you have to spend during the month. Start calculating all your monthly expenses. This includes everything from your mortgage and utility payments, car payments, credit cards to the smallest of expenses. List them by keeping them in specific categories. Subtract your expenses from your income and see what’s left.
This is your first budget because it shows you what your money has been doing each month. Now that you have a budget you can look at, it’s much easier to not only see where your money is going, but also take back control of where your money is going. And when that happens, you can start setting goals, both short-term and long-term, for your money.
It will take some time to dial in your money budget. Most people say that if they stick with it, they start to get a clear picture of their budget and financial situation in about 3 months. If you’ve never learned how to properly budget money, the best way to get started is to just get started.
