Essentials of Finances Part 2 – Starting a Budget

When you have committed to being responsible with your finances, one of the first things that you want to do is to set up a budget.  To some, this can be an overwhelming task. While you won’t be perfect from the start, there’s no reason why you shouldn’t start now. You can always learn from your mistakes.

How should I set up the Budget? What needs to be included?

These are important questions to ask, but it should not prevent you from getting started.  In fact, the first thing to do is to start small.  Don’t try to have so many details or things that you get overwhelmed and sick of budgeting with your first attempt.  While I encourage people to start small, the best word of advice is  to use as much information as you feel comfortable with.  For those of you like me, who enjoy budgeting and tracking expenses (I understand this may be rare), you may want to get as detailed as possible.  Even if you are not as excited as I am, you should try to celebrate your achievements  as you progress.

Be reasonable, but include everything

The other thing to recognize is that a budget is also a tool to help track your expenses.  No one is capable of spending the exact same amount of money each month no matter how much planning is invested.  Expenses come up and a budget will help you prepare for and keep track of it when it happens.  If you don’t include every daily expenses, your budget will not give you an accurate picture of your income-to-expenses ratio.

Start Now

You may find that you want to improve the format of your budget as you go along.  This is okay! Take joy in the fact that you are being responsible with your finances as you improve your budget.  Also, don’t let this prevent you from starting today.  Recognize that you will modify your budget as things change.  I personally like to update the format of my budget each calendar year to make it do more calculations or more user-friendly.

A great way to start would be to download a sample budget.  Microsoft offers templates with excel, but I have created a Sample Budget for you to use.  By adding in your income and expenses for each month, you can not only view your cash flow (how much you are saving or over-spending) for each month, but can view the year’s progress.  The best part of it is that the spreadsheet does all the calculations for you. Don’t ever spend the time to do all the numbers with a calculator.  This doesn’t have all the bells and whistles, but it is a great starting point.

Enjoy making your budget.  Let me know how it goes or what you prefer to do with your budget.

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