I must be some sort of wicked stepmother because I want you to make a budget. Now before your knee-jerk reaction of I-hate-budgets or I-don’t-make-enough-money-to-have-a-budget, think it over. Many people have the misconception that budgets are constraining. In reality, budgets are all about freedom – freedom to stop worrying about money because with a budget, you have it under control.
The first step in making a budget is knowing what you really spend so gather up your bills from the past few months (at least three months) and your bank statements. Make a list of each expense (telephone, gasoline, housing, etc.) and if it is variable, use your past bills to get a monthly average. (Haven’t averaged anything since high school? Add the items up then divide by the number of items.) Have one column for the average and a second column for the actual (yes, you’re actually going to have to track what you’re spending to see if your budget is accurate).
Now you have to compare your outgoing to your incoming – this is where your bank statements or pay stubs come in handy. Average out your monthly income. How are the numbers looking? Did you get a surprise surplus? Are you running a deficit? Knowledge is power and you can start working with real numbers to either cut down expense, pay down debt, loosen up your budget or save for a rainy day.
Note about your spreadsheet: Notice that huge amount that you’ve named “miscellaneous”? Yeah, you need to get a handle on that. For the next few months, start writing down everything you buy. That includes the stuff that you don’t want to write down and the stuff you buy with those random ATM withdrawals. This should be illuminating as it will show you where your money is really going (and it’s not the places where you thought it was going). From here you can decide if you really want a $4.00 mid-morning latte or if you’d rather spend that $1040.00 elsewhere (yes, that’s really how much you’d spend for a $4.00 latte every weekday morning for a year).