Financial Fundamentals: Budgeting Made Easy

By Kelly Hodges
Let’s be honest, no one likes to budget.  The word “budget” itself evokes feelings of self-deprivation, sacrifice, and restriction.  It’s akin to dieting- not fun, but necessary to keep your finances (or waist-line) in healthy proportion.  Although making a budget may never be a task you’ll totally enjoy, there are some steps to make the process less painful and time consuming.

1.  Track your spending.  The first step to creating a budget is to understand where exactly your money is going.  Track every penny coming in and going out for at least a month to get a handle on your current spending habits.  Make a few broad categories to group your purchases into like food and restaurants, entertainment, medical expenses, insurance, debt repayment, etc.  You need this information to proceed with the rest of the budget making process and to ultimately ensure that you are spending less than you earn. It doesn’t matter what system you use to do this (pen and paper, an excel spreadsheet, a website like, find what works best for you and be diligent about tracking everything!

2.  Evaluate your spending.  The numbers don’t lie.  Taking a good hard look at where you are spending your money can be quite an eye opening experience.  You may have never thought twice before about spending $7 for lunch at work, but when you see it add up to $35 each week, $150 each month, and ultimately $1800 each year it becomes a much more significant purchase.  Look at each area of spending in light of your overall financial goals; could that $1800 be better spent paying off student loan debt or saving towards retirement?  By evaluating the numbers you will be able to determine which expenses are necessary, and which can be reallocated to something more financially sound.

3.  Make the budget realistic.  Once you identify areas in your budget where you feel you could reduce spending, create some cutbacks that are realistic.  If you spend an average of $500 per month eating out at restaurants you don’t want to cut the budget to $50 for next month as this is just setting yourself up for failure.  Instead, try budgeting for $450 next month.  When you are successful in sticking to that number try shrinking it to $400 the next month.  You are far more likely to succeed in keeping within the budget if you make gradual adjustments then if you try and do a complete financial overhaul all at once.

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4.  Budget for your goals.  Whatever your financial goals are, make sure that funding them is in your budget.  As you plan to reduce spending in some areas reallocate that money towards your goals.  Take it a step further and automate those payments directly from your checking into a separate savings account.  By paying yourself first you can ensure your down payment money doesn’t get used towards buying a new suit.

5.  Budget in for fun.  If there is no room in the budget for doing anything you enjoy, then you are doomed to fail.  Of course it is hard to stick with a plan if you can never go out to eat, or to a movie, or take a vacation.  If you factor these important things into the budget, then not only will you have money for them, but you’ll also be able to enjoy them more because you won’t be feeling guilty.  If you’ve worked hard, budgeted, and saved for those concert tickets you wanted, then you can go and have a great time and not worry about how you’re going to pay for it later.



Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of her employer or any other person or entity.

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