How Budgeting Can Change your Life

Budgeting is an important habit, as it can help you save up for your first house, a new car, or to allow you to pull yourself out of debt. Essentially, a budget lets you know how much income is coming in each month and how much money you must pay towards bills and other expenses. Sitting down and finding a budget that is right for you and your family is half the battle. The other half is actually sticking to that budget, as hard as it may be. The first way budgeting can change your life is by allowing you to create savings. After deciding how much money you make each month and how much you have to spend each month, you can decide what portion of your monthly income can go into savings. Many banks accounts allow you to set up an automatic direct deposit so that you can easily transfer a set amount of money into savings each month or week.

Budgeting

After you have accounted for how much you can save each month, when budgeting you should decide how much extra spending money you can have each week. This is money that you use for lunch with a friend or for other small expenses. Using cash for these expenses is a simple way for you to monitor this weekly allowance. If, for example, you give yourself $20 for extra spending money each week, you will soon see how spending $2 for coffee each morning adds up and takes away from your overall budget. After you have been budgeting for a few weeks or months, you may decide that you still need more money for savings or other expenses. At this point you should reanalyze your budget to find areas you can cut. One way to do this is by consistently saving your receipts. By reviewing your receipts, you can see what small expenses you have that are unnecessary.

Maybe you are a smoker. From reanalyzing your receipts you will notice how often you buy cigarettes and how that seemingly small expense adds up. It may inspire you to cut back or quit smoking in order to save money. A final element of budgeting is making significant strides towards paying off debt. Organize what credit card bills and other loans you have. Be sure to outline how much you owe to each and at what interest rate you are paying the loan back at. Focus on paying off the bill with the largest interest rate and only pay the minimum to each other bill. You will more quickly pay off the bill that is costing you the most and then begin to focus your budget on paying off other loans will smaller interest rates.