Hundreds of thousands of Americans have no idea where their money goes after each paycheck. Do you know where your paycheck goes? Are you aware of how much money remains to be spent until the next pay day? If your answer was -NO- to these questions, it might be a good time to get your finances in check. This can easily be done by setting up a budget!
The initial step to efficiently save more money after each paycheck is to track daily expenses. There are various methods to accomplish this, Some may work better for you than others, so be sure to give them each a try and see what fits you best. You must know that the key to success here is to find a system you like and don’t sway!
First: Track Spending
Our money is spent in many ways. We use debit, cash, credit cards and even have some bills on auto-pay. It is necessary to have a way to track all of your spending.
The good news is, there are tons of tools to help you track your spending. Your phone’s app store surely has dozens of tools that you can research and based on the reviews find the one that works for you. Try a couple, they are usually free and easy to use. Put aside a few months of your spending. Add up the costs and create broad categories, such as, housing, utilities, grocery, entertainment, medical bills, credit card bills, car payment, emergency fund, and also every other thing you can imagine. The point here is to capture as much money as possible and group them together.
Second: Build Your Budget
Now that you have a full view of where your money is going, its time to see if its going in the right places. Create a realistic budget, many fail to budget for necessities and end up with frustration over fund displacement. Look at spending that can be reduced and take those savings and budget to pay down high-interest debt. Don’t have any debt? Use the extra budgeted cash to add to your savings! Not sure what your budget tracker should look like? Take a look at our budget work sheet.
Third: Stick to Your Budget
Setting up a budget couldn’t be easier, the more difficult part is actually sticking to the budget. The trick to this is to go back to the first step and closely tracking your spending. Check your balances weekly to be certain you are staying within your allocated budget. In today’s digital age there are many free online tools that can streamline the budget creation process. Now all you need to do is work on the discipline and you will be on your way to financial freedom!
The key to budgeting is to find a method that works for you and use it to reach your goals.