3 Things You Need to Know to Start a Budget

3 Things You Need to Know to Start a Budget

Yes, I said it BUDGET…do you have one?

Many people I talk to say no. Others say they started a budget but it just doesn’t work for them. Most if not all individuals in accounting and finance will tell you that budgeting is the key to getting what you want.

Unfortunately the word budget has gotten a bad reputation. Budgeting is a way to tell your money where to go, not wonder where it went! It’s not meant to restrict you from having that coffee every day or deprive you of fun, at least not the way I coach my clients to do it!

Here are some key things you need to pull together to start a budget:

  1. Pull together your income amounts from all sources either on a weekly, monthly, or yearly basis.
  2. Find out what you spent last year. We are creatures of habit. Your spending in the previous year is a good starting point to determine your spending for the current year.
  3. Now determine what is different from last year to this year for either income or expenses. This is important to ensure you account for any additional expenses you need to pay or additional income you may have to spend.

You now have the 3 key components to get started with the fun exercise of creating your budget.

If your expenses are higher than your income, you may need to either cut expenses or increase your income.  If your income is higher than your expenses, congratulations! You are “living within your means”.

Now, what are you doing with that extra money?  Will you save it? Put it towards loans to pay down? Whatever you do, make sure you are consciously deciding what to do and not just spending it because you have it.

You know what you need to start a budget that helps you know where your money goes. It’s as simple as that! So why wait.