The Basic Budget
by Christa Palm
Budgeting can sound intimidating. It may seem impossible to keep track of cash, debts, paychecks, bills and savings to those new to the finance world, but actually, budgeting is not as difficult as it appears. A few rather simple tips can keep a person on the straight and narrow to financial freedom. Let's look at the basic budget.
What is a Budget?
Most likely you already know what budgeting is, but let's define it to help make our "How to Budget" section a little more clear. Basically, budgeting means that you take your income every paycheck and break it into categories of payment. You may have to pay bills, put aside savings, buy groceries, contribute to a 401(k), fund other investments, and have a little fun (dinners out, movies, etc.).
Pretty simple, huh? Well, how to budget is a little more detailed, but it's not terribly difficult. Let's take a closer look.
How to Budget
Budgeting how-to boils down to a little planning ahead. You know, for example, that your rent or mortgage payment is due at the end of the month. Let's say that you get paid on the 15th and the last day of the month. To budget around this, you can schedule your other bills around your largest payment or you can save part of your paycheck on the 15th for your housing. See? You're already budgeting.
Of course, budgeting can be more intense than this. You might be paid only once a month; you may combine paychecks from a significant other or multiple jobs; or you could work a seasonal job. Whatever the case, planning ahead can work wonders for your financial world.
Budgeting Tricks
When you begin your budget, there are some great ways to keep track of all that cash without a lot of hassle. Let's look at some of the main tricks of the trade.
- Do the Math: Calculating your liabilities and income can help you decide how much you can budget for other things. Add up how much you get paid and subtract everything you owe to determine how much is left over. Then you can divvy the remainder up amongst savings, groceries, and any other necessities.
- Call on Your Computer for Help: Some awesome software and apps are available to help you in all your budgeting needs. Check out Moneydance, Quicken, or BilllTracker to help you budget.
Other Tips and Cautions
When you first begin to budget, it may be even more important to live below your means, especially if you are first starting out on your own. Budgeting is almost never as straightforward as it appears; sometimes unexpected fees can pop up that could leave you stranded on paycheck to paycheck living.
As you move forward through your new budgeting lifestyle, you'll learn things about your own spending practices that will make future budgeting easier. You may even be surprised to find yourself super-budgeting – follow us in the coming weeks to look at what super-budgeting entails!
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Invest It Wisely wrote:
Thu, 08/18/2011 - 00:40 Comment #: 1I aim to keep the biggest items, like savings rate, total house expenses, car expenses, within guidelines, and don't sweat the small stuff at all. I do keep basic track of what goes in and out of the bank accounts.
femmefrugality wrote:
Thu, 08/18/2011 - 03:45 Comment #: 2My biggest thing is to budget in my incoming money conservatively and my spending/bills liberally...that way I'm prepared for the worst and usually end up less stressed out in real life.
Christa Palm wrote:
Thu, 08/18/2011 - 15:10 Comment #: 3Invest it Wisely, that's my budgeting as well. I must admit I could keep track of the small stuff much better, but the hubby and I don't really spend all that much anyway. Creatures of habit, we often spend the same amount every month, so keeping basic track has worked well for us as well!
FemmeFrugality, I like how you budget! I might have to try that. Like I mentioned above, I keep track of things but could do a lot better. Your budget still sounds easygoing yet covers you for those unforeseen events -- great job!
MoneyCone wrote:
Thu, 08/18/2011 - 17:15 Comment #: 4If you've never budgeted before, be prepared for the possibility of being way off your budget! You don't have to be perfect, but tweak it as you go along and very soon you'll find your accuracy starts improving.
(PS: that is my story!) :)
Miss T @ Prairie Eco-Thrifter wrote:
Thu, 08/18/2011 - 19:00 Comment #: 5Great post. I also think it is important to have a clear vision of your goals and what you want and when you want it. Often it is the rush to reach these goals that throws a budget out of whack.
Christa Palm wrote:
Fri, 08/19/2011 - 20:44 Comment #: 6MoneyCone, your story sounds a lot like mine! Tweaking the budget is part of life, especially in the beginning of learning to stash your cash!
Miss T, very true -- charting out your goals in attainable time periods sure can help a lot!
Women and Finances: Getting Started Budgeting and Investing wrote:
Wed, 01/18/2012 - 21:15 Comment #: 7[...] help creating a budget? Here are tips for a basic budget and advanced budgeting [...]