Budgeting money is one of the most effective ways to efficiently use money received from paychecks, gifts and other sources. A budget involves making a plan for money received, so that expenses can be paid, money can be saved and purchases can be made. Following a few guidelines when it comes to budgeting money might ensure that the budget is functional and practical for use in daily life. Some ways to effectively create a budget are for a person to accurately project income, use categories that are relevant to daily life, include categories for expenses that occur less frequently, save a portion of income and leave room for flexibility.
The first step in budgeting money is to accurately project income. If income is overestimated, an individual might think he or she has more money to disperse than he or she actually does. Knowing how much money will actually be received helps ensure that all expenses will be covered for the month without having a deficit.
Another step in budgeting money is to set up expense categories. Categorizing expenses accomplishes several goals, such as allowing an individual to ensure that all expenses are covered; allowing him or her to have an accounting for all expenses, whether monthly or less frequent; and allowing the individual to identify areas in which he or she might need to curb spending. Between financial advice books, magazines and the Internet, there are many sources where one can find examples of budget categories. Perusing these can give an individual a good idea of categories to use, but one should remember to keep the budget personal and applicable to his or her spending habits, or the budget will not work.
Sometimes expenses are predictable and occur every month like clockwork, with the same amount of money and due date. Other expenses do not occur as frequently, but it is still important to include them when budgeting money. Expenses such as car registrations, insurance payments and homeowner’s association dues might not occur every month, but they should still be saved for on a regular basis so that when they do come due, money is available to pay them.
Some of the best advice for one to adhere to when creating a budget is to save money first. If this money is taken out of the monthly income before anything else, it is much more likely that an individual might be able to save money over a period of time. Some people find it useful to set up an automatic debit for their savings amount.
Another important consideration when budgeting money is for one to leave room for flexibility. A budget is a constant work-in-progress, meaning that each month might bring with it new changes to income or expenses. Having the flexibility to go in and change the budget is important so that all expenses are covered each month.
