How to Budget Your Money Properly


Budgeting properly may not be something you feel you are good at doing, especially on a regular basis. You may find yourself like many others. You sit down on a Sunday afternoon and get serious about the bills. You work out a plan to pay every bill on time, even track them on a calendar. You are set. By the time the week is over, you are sitting there wondering what went wrong. How did this happen? Surely there should be enough to pay the bills.

Did you know that only 40 percent of Americans actually say they have a budget? That’s shockingly low but it could explain why so many people struggle to manage their money.

The Biggest Mistakes

Are you guilty of the following mistakes when you create a budget? If you create one, you may be making small mistakes that have a big impact.

Are you looking at your current bills and expenses prior to determining how much you need for each category of your budget? Just because you are allotting $75 for gas doesn’t mean that’s enough if you haven’t really figured out how much you are spending on it.

Are you including all expenses, including those small odds and end bills you get each month? Are you taking into consideration more than just your utilities and groceries?

Are you being realistic? If you say you are going to spend just $100 a week on groceries, you need to have a plan to make that happen. It takes time to plan a menu and to work out of your pantry.

Are you planning for entertainment and purchases you may need throughout the month? If not, you are setting yourself up to fail.

Are you budgeting for savings? You should be paying yourself before you pay anyone else. Put the money into a CD, retirement account or an untouched savings account so you have an emergency fund.

Now that you know the most common mistakes individuals make, it is time to consider how to set up a proper budget. The good news is it does not start right now.

Plan First

Before you can create an accurate budget, you need to track your actual expenses. To do this, start by taking a small notebook with you everywhere. For the next month, you need to track where you spend every dollar. That includes stops for fast food, money given to the kids, money spent on popcorn at the movies and even those flowers you planned to buy for your wife but purchased lottery tickets instead. In other words – everything needs to be jotted down.

Divide It Up

Next, take those figures and organize them into categories like the following. Be sure to choose categories that fit your specific needs.

  • Utilities (such as telephone, Internet, gas, heat, water, etc)
  • Mortgage or rent payment
  • Insurance payments
  • Fuel for the vehicles
  • Groceries
  • Eating out, spending money
  • Necessities – haircuts, lunch money, etc
  • Savings
  • Personal loans, credit cards, etc

Once you create all of the categories that work for you, list the dollar figure you spent last month next to it. This gives you a clear indication of what you are really spending.

What Do You Need to Do

Add up all of those expenses. Now, add up all of your income. If you are not bringing in enough, it is time to think about ways to cut expenses. Here’s the thing. You don’t necessarily need to go out and actually earn more, not yet. Rather, you need to focus first on creating a budget with the income you have.

Pinpoint areas you can cut into. Where are you overspending? Did you know that about 30 percent of people in the United States eat out at least one time per week? 16 percent out two or three times a week and 7 percent eat out as much as four or more times. Is this your problem area? If so, trim it.

Locate the problems if they exist and try to cut into them. Some bills you cannot change, such as your mortgage payment. However, you can cut back on utility costs by being more frugal. You can slash that cable bill by cutting out the movie channels. Look for ways to trim the budget realistically.

Create an Accurate Budget

Now, create your budget. Assign a dollar amount to each category for the upcoming month. Be realistic on what you spend and what you plan to trim out of this budget. You should be putting money towards paying down debt and saving, too. Work out the details until it balances so you end up with a zero balance.

Do you need to work more? Some people do. If you are going to work hard at getting rid of debt, you’ll need to budget wisely and increase income as it needs to be. However, before you tack on more hours onto your work schedule, be sure you focus first on trimming areas of your budget that you can.

Most importantly, once you get it down on paper educate everyone in the family about the goals. Explain why it is necessary. Teach the kids to do the same thing because they will, one day, need this lesson as well. Then, work that budget. Do everything you can to stick to the plan and to accomplish your financial goals.