Creating a budget is one of the most effective ways to save money and eliminate stress in your life. So, why is it difficult to live on a budget? Many don’t think they can live on a budget or don’t know where to start. Some have had a bad experience with a “rigid” budget in the past that didn’t work for them. But budgeting works if you do it right. Here are a few basic steps to get you started:
Step #1: Figure Out How Much Money You Make. For most people, this amount is the same from month to month. But if you’re self-employed or work on commission or seasonally, this may not be all that easy to determine. The best approach is to use the amount you made the prior month instead of “anticipating” what you’ll make in the coming month. Use your best judgment.
Step #2: Determine What You Spend. There are certain expenses that are the same every month, such as your mortgage or rent. Other expenses will vary from month to month. For these categories, you’ll need to take an average of what you’ve spent in the past to set up your budget each month. And, if you have debts, don’t forget to include your payments as budget items.
Step #3: Establish An Emergency Savings Fund. Take a look at expenses you’ve had over the past year that were unanticipated – medical bills, car repairs, etc. Once you figure out how much you think you’ll spend on these expenses every year, divide that cost by 12. That way, you can budget money every month to cover these costs.
Step #4: Track Your Expenses. Find the best way to track your expenses – every single penny you spend. The most critical part to maintaining any budget effectively is to track and monitor your expenses. There are online resources you can use, such as BancorpSouth’s Budgetwi$e financial budgeting tool available through Online Banking, to make this process convenient. The easier it is to track, the more likely you’ll stick to a budget.
Step #5: Review and Adjust. The key to a successful budget is to remember to be flexible. Review your budget monthly and adjust it where necessary. As you track your spending, you can shift dollars from one category to another. Over time, you’ll work your way toward a budget that fits your needs.
When is the right time to establish a budget? Today! Using the steps above, you can begin to build an effective budget to help reach your financial goals.
To learn more about how BancorpSouth can help you set up or track your budget, click here.
© BancorpSouth 2018