Budgeting and saving money process

Posted on February 27th, 2009

Spending more then you ear can result in some major problems and severe debt. With a good budgeting process, you should have your spending prioritized for the difference between your wants and needs. Once you have identified the difference, keeping your budget under control will be easier and you will be able to save money.

Step 1: Before you begin the budgeting process, you should gather all your credit card and bank statements, bills, pay slips, invoices, etc.

Step 2: Group expenses into categories such as Home, Car, insurance, Travel, Entertainment, etc

Step 3: Use an excel file with two columns: Category and Monthly Expense.

Step 4: Based on your statements calculate your monthly expenses for each category and sum them up.

Now that you know how much you are currently spending money on, it is now time to look at how much is the right amount on each category to spend. This will allow you to keep your finances in control and put a little extra in your savings.

If you currently spend more than you earn, you will eventually have to dig into your savings, ending in you having to borrow resulting in more debt. Your health and mental stability will suffer as well, being in debt effects more then your pocket.

Now, before any purchases, ask yourself if you can afford it. The most vital thing is to understand that your finances lead your lifestyle, not your lifestyle leading your finances. One big problem many people do is search for the cheapest price on something they are looking for instead of looking to see if they can afford even that.

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