nav-left cat-right

4 Simple Steps To Budgeting That Anyone Can Do

steps to budgeting imageThere’s an expression that I use regularly with Clients … “What gets measured gets managed”. Meaning if you are not measuring where your money is going, you’re not managing where your money is going. With the 4 simple steps to budgeting I’m about to share with you, anyone can begin to make a significant improvement in their finances.

Budgeting is characterized as a nice to do vs. a need to do for most individuals and Families that I meet with on a daily basis. Yet in order to gain complete clarity on where your money is going, you’ve got to build and manage a realistic budget.

Think of any successful business that you regularly deal with. I can guarantee that budgeting is a predictable routine they have implemented in order to manage the business effectively. Now think of your household as your own Family business.

In fact… A budget can only have one of 3 possible outcomes. (1) A surplus, meaning when you run out of month, you still have money. (2) A deficit, meaning you run out of money before you run out of month. (3) A balanced budget meaning that every net income dollar flowing through your household was purposefully allocated by you to do something for you.

Steps To Budgeting

Here are 4 simple steps to measure and manage your budget:

Step 1 – Track your spending for an entire calendar month. And whether you pick up a stick of gum from the convenience store or withdraw cash from an ATM, get receipts for all of it. Stuff all of your receipts into a single letter sized envelope. At the end of the month, dump all the receipts onto the kitchen table, sort them by category (i.e. food, entertainment, fuel) and add them up.

Step 2 – On a blank piece of paper, write down the following expense categories.

  • Housing – these are your bills, the mortgage / rent
  • Personal – dining out, gifts, charities, smoking, alcohol
  • Living – food, clothing, grooming
  • Transportation – car payments, gas, repairs
  • Insurance – vehicle, house, life
  • Payments – credit cards, lines of credit, debts
  • Saving – don’t even dream about allocating dollars to this category if you are in debt

Step 3 – Calculate total net income from all sources. Allocate money to each of the above categories and prioritize paying off your debt before saving money.

Step 4 – Repeat steps 1 and 2

If you can practice 4 simple steps to budgeting for a minimum of 3 months in a row, it will become habit forming. And believe me, it’s a good habit to have.

This guest post from Jayson Lowe of McGuire Financial Group.

What’s your experience been with the budgeting? Have you learned any tricks that helped you? Leave your comment in the box below.