Monday we talked about various financial resolutions you might make, and the importance of getting your finances in order for the new year. The best place to start, in my opinion, is with a budget.
For some reason I can’t fully understand, budgets scare people. I don’t know how many times I have heard people say “I can’t budget.” Nonsense. Budgeting doesn’t have to be complicated. Some people enjoy budgeting in minute detail, down to the last penny. For most this is not realistic. A budget is simply a plan. A guideline. A map to reach your financial goals.
A budget should never be a financial starvation diet. That won’t work for the long haul. Make reasonable estimates for food, clothing, shelter, utilities and insurance and set aside a reasonable amount for entertainment and the occasional luxury item. First, budget for fixed expenses, then for savings, and then your other spending.
Even a small amount saved will help you reach your long term and short term financial goals. You can find many budget forms on the internet. Two of my favourites are from Gail Vaz Oxlade (of TVs Till Debt Do Us Part) and the “Finance for a Freelance Life” blog. If these don’t work for you, just use any search engine you choose and type in “free budget forms”.
You’ll get lots of hits. Print one out and work on it with your spouse or partner. Both of you will need to be happy with the final result and feel like it’s something you can stick to.
Of course, the key to budgeting is that at the bottom of the page, income should exceed or be equal to your expenses. If not, you are spending more than you earn and could end up in trouble with debt. If this is the case, go back over your worksheet and find places to cut costs. Perhaps you can only afford to eat out every two weeks rather than every week. Or you have to cut down your grocery bill.
If you have a spouse or partner it is very important that you work on this budget together. Sit down and figure out what your joint financial goals are – long term and short term. How much do you need to save to reach these goals? Where are you willing to cut costs if needed? (This can be the trickiest part. I thought we spent way too much money on groceries, my husband felt we should cut back on entertainment. We did a little of both in the end.)
Every journey begins with one step and the first step to attaining your financial goals is to make a realistic budget that both of you can live with.
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