Creating a budget, or as some more pleasantly call, a spending plan is vital if you achieve any financial success in the coming year. After all, as Benjamin Franklin once said, “a failure to plan, is a plan to fail.” Read on to learn some helpful tips on getting your budget in order in 2019:
Qualify What You Have Coming In
The fist step of any spending plan or budget is figuring out how much income you actually have coming in on a regular basis. Count every penny. If you have a side job, that income needs to be counted, any other regular income, no matter the source needs to be considered. Look at your bank account and pay stubs to figure out this number.
List Your Expenses
Now comes the less than ideal part of budgeting, watching all your money go away. Just kidding, it’s not really that bad, but seriously, you must list each and every expense you have. Regular expenses include bills like your rent or mortgage, of course. However, you may not think about counting your Starbucks run in the morning, or what you spend getting a snack out of a machine at work during your afternoon slump. Count it all. Every single penny. If you use cash, keep a small notebook and jot your spending down as you go. Keep up with it for at least a few weeks to begin to see a pattern or look at your bank statements going back 90 days to get a good idea about your spending at the present time.
Determine What To Do About Discrepancies
In many cases, when you go through and compare what’s coming in and what’s going out, you will learn some less than ideal information. You might just be perpetually spending more than you’re making, which means you will never get ahead, or build an emergency fund much less begin building a retirement account for the future. If this true for you after you complete the first two tips, you need to make some hard decisions. In order to create a margin between your income and your expenses, you might have to give up some of your luxuries. Perhaps, you can start making coffee at home for most days of the week and only going through the drive through once a week for a coffee run.
Build an Emergency Account
When you free up some revenue by cutting out unnecessary spending, you can then move to building an emergency account. Many financial experts recommend beginning with $1,000 in your savings account for unexpected emergencies. Having this in place will prevent you from having to increase your debt by charging your way into a new appliance, getting one repaired or dealing with any other unexpected expense. Building this emergency fund won’t be easy and you probably won’t get there fast. It may take you several months of work, but you will do it!
Beat The Debt
Once you get your emergency fund in place, you can begin fighting debt. Reducing your debt is the single best way to increase your financial security. Use the money you were setting aside to build your emergency fund to attack your smallest debt. Once the first debt is paid off, use that money to put towards the next smallest debt and so on. Eventually, you will be debt free.
Use these tips listed above to get your budget together for 2019.