Get Organized in 2012: 7 Steps to a Better BudgetHeather Sokol
We try to go through our budget regularly, but as time goes on it’s easy for it to become just as much of a mess as the rest of my house.
The hubby gets lax about packing a lunch. I get caught up in shopping momentum through the holidays and right into the new year. And before you know it, we’re spending more than we had originally budgeted.
That’s why I created the 31 Days to a Better Budget last year. Our budget needed some serious help, but it had gotten to be a bit overwhelming for me. Breaking it down into a step by step process allowed me to tackle our budget a little at a time over the course of a month. Now that I’m more organized about it, I can work through each step a little quicker and regain control over our finances.
If your budget needs a kick in the pants, take a step back and reassess your expenses. You can do this in a few hours or a few minutes each day. In just one week, you’ll have an organized monthly budget to help you reach your financial goals.
Get Organized 1 of 7
Sort Finances 2 of 7Once you have your pile of paperwork together, don't look at the numbers yet or stress over the amount of bills — that comes later. For now, just sort it out into these categories:
- Recurring bills
- Fluctuating bills
- One-time bills
- Credit card statements
- Bank statements
- Pay stubs
Read more about sorting finances on Inexpensively
Photo Credit: Flickr
Plug in the Numbers 3 of 7And, now you can look at the totals. Whether you use a software program, online tools or budget worksheets, start plugging in numbers to pave the way for creating a monthly budget. Start with a single stack, and keep track of:
- Assets & Income: include balances for all accounts—checking, savings, CD, 401K investment, etc—as well as income
- Household Payments: include all utilities, regular payments, occasional expenses, etc (don't forget annual things like vehicle registration)
- Insurance: include all insurance accounts, both for record keeping and as a way to keep track of your payments
- Debt Management: include all debt—credit cards, store cards, loans, vehicles, mortgages, student loans, etc
Find more budget worksheets at Inexpensively
Identify Priorities 4 of 7Now, take a look at the expenses you have just sorted and decide what is most important. Star all mandatory bills & payments. Then, list all other expenses in order of importance to your family. Finally, highlight your top three expenses — this can help you find items that are out of line with your income or areas where you may be able to cut costs.
Read more about prioritizing expenses at Inexpensively
Track Expenses 5 of 7Hopefully, you found enough receipts in the first step to help you figure out those non-billed expenses. If not, track your spending for a few weeks to see where your money is going each day. It will help you set a reasonable limit on each category, as you create a budget.
Read more about tracking expenses on Inexpensively
Photo Credit: Flickr
Create a Monthly Budget 6 of 7A monthly budget is basically assets minus expenses. So, start with your income. Then, list your expenses in order of the priorities you set earlier. When you have a list of everything you spend money on, it's time to do the math. Don't worry if there isn't a surplus. Right now you just want to get a picture of your finances. Later, you can eliminate expenses from the bottom up or find ways to reduce spending.
Read more about how to create a budget on Inexpensively
Set Goals 7 of 7Before you make any decisions about what to cut out, set a goal for your new budget. How much extra money do you want to have each month? You should also have a picture of where you want any extra money to go. It's the best motivation for sticking to a new budget. Decide what you want out of a budget plan, then check out the rest of my 31 Days to a Better Budget for tips on getting there.
Read more about setting financial goals on Inexpensively
For more money management tips, and a step by step look at ways to cut your finances, check out the 31 Days to a Better Budget series on Inexpensively.
Photo Credit: Flickr
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