Needless to say, you are probably reading this article because you need a budget and I am going to tell you why.
Track expenses for one week for a quick budget and track expenses for one month for a more thorough budget. First of all, use a spreadsheet software program or notebook to record all outgoing expenses. Record everything. When I say everything, I mean everything! The $1.50 Mountain Dew you by off the food cart walking down Main Street on your break and the .50 you put in the machine to get your son a tattoo. Don’t forget things like ATM fees either.
Go through your bank statement and record all regular, monthly and bi-monthly outgoing expenses. For the quick budget, figure the amount being paid for each expense, it goes for monthly too.
At the end of the time period you have chosen, add up all expenses. Now mark or highlight all insignificant expenses. Add the amount of these items up separately. Wow! At least if you are like me, you are in shock by this amount.
Each person in your family is to look at the “insignificant” list (including Starbuck coffee, manicures, etc.) and choose one item they can either live without or one item that costs an extraordinary amount in comparison to the rest of the list.
For the quick budget, take the amount, multiply by 52, and then multiply that amount by 60. This indispensable expense is now represented in an amount to you as the cost for the next 5 years. 5 years! Now imagine how much you will save if you cut this expense out all together or even in half (plus interest if you can earn in savings). For the monthly budget, multiply your “insignificant expense” by 60 to get your 5-year gross amount.
Spending can be cut down in many ways. Instead of getting Starbucks daily, commit to only buy a Starbucks coffee on payday and start drinking coffee at home or join that much cheaper coffee club at work.
While we all think that a dollar here and three dollars here is okay, we are sabotaging our efforts to create financial success and instead living paycheck to paycheck week after week. This is why you need a budget.