How to Make (and Stick to) a Budget

Whether you are looking to purchase a home, raise a family, or save for retirement, proper money management is absolutely essential.  Unfortunately, in a world where getting a credit card and buying on payments is easier than ever before, this is not always a task that is easily managed. Let’s look at how creating (and sticking to) a budget can help you save and manage your money.

When looking to create a budget, the first thing you should do is calculate your expenses.  Write down how much you spend each month on housing, utilities, vehicles, food, clothing, entertainment, and luxuries.  Make sure that you write down everything you can think of, as well as annual expenditures such as Christmas, birthdays, and holidays.  Now go back through the list and look at what things could be reduced or even eliminated.  Proper money management is all about reducing unnecessary expenses. The more you cut back on, the more you save.

Once you know how much money is going out, take an inventory of how much is coming in.  Your housing should account for 1/3 of your budget, and bills and luxuries should account for another 1/3.  If this is not the case, then you need to be looking at ways to cut expenses and save money. 


For instance, do you really need two cars?  If not, sell one and use the cash to fix the roof or invest in a home improvement job that will add concrete value to your home.  Are you spending $100 a month or more on cable TV, but you only really watch one or two shows regularly? Consider ditching The Box and get a Netflix subscription. You can rent your favorite shows and movies On Demand for less than $10 a month, and get them streamed straight to your TV set. (You’ll save over $1000 a year with this small step!)

Once you have managed the amount of money coming in and going out, it is time to start saving.  A savings account can be a great idea, and purchasing CDs when you have enough money saved is a great way to build interest while preventing spending.  Remember that saved money is not for vacations and extravagances, but for life emergencies such as accidents, illnesses, redundancy and (later) for retirement. 

With careful budgeting and a good idea of how to save and spend, you will find yourself in a much better financial position.

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