A budget is one of the handiest tools at your disposal in the quest to live frugally. The benefits of a budget canít be understated. A budget helps you keep your mind focused on your finances. By maintaining a budget, you will feel connected and in control of your personal finances. Frivolous spending will decrease simply because of your awareness of your personal financial situation.
Setting up a budget requires some work and a lot of personal inventory. It is a time for taking stock of what really matters in your life and planning your finances around this accordingly. Creating a budget is like visiting the doctor for your money. You get to assess all of your strengths and weaknesses and determine what areas can be improved upon.
Let your personal budget be your guide. By predetermining how and where you wish to allocate your finances, you are no longer prisoner to debt and excess spending. Creating a budget can help you get out of debt and arrange your life in a way that leads to more goals being met and more happiness. Do you long for a trip to Italy? Work it into your budget! Set aside $50 a week for two years and voila, youíve got a trip to Italy! Anything is achievable when organized in the confines of your personal budget.
A major tip for setting up a budget is to err to the side of overestimating how much money youíll need for certain things. In general, people tend to underestimate lifeís expenses. You might surmise that you can get by on a weekly grocery budget of $100, but when real life gets in the way, you realize you need more like $120 to make it. By making somewhat generous estimates of how much you need to allocate to certain areas, you are able to avoid the frustration that comes from not being able to live within your budget.
Set up a budget in order of needs. Must-have items like the rent or mortgage payment, electrical bill, and food expenses need to be prioritized at the top. As you work your way down your budget, you can start mixing in optional items if you are able to afford them. There may be some harsh truths to face as you realize you cannot save for a vacation and enjoy owning an awesome sports car simultaneously. Cuts will need to be made. Tough decisions will be faced at the margins. It all comes down to what is most important to you.
A budget is easier to follow when it is realistic. Keep some money set aside for discretionary spending. You have to be able to live and have a little money available at your disposal on a whim. Donít strap your entire budget down to bills and left feeling miserable because you canít afford to leave the house. An ideal budget includes a nice amount of savings, some discretionary funds, and the rest towards day-to-day living expenses.
If you need to cut some major expenses, look at what is costing you the most money and ask yourself: do I need to spend that much? If your car is costing you $500 a month, consider downgrading to something a bit more reasonable in hopes of saving a few hundred a month. Ask yourself: would I be willing to give up a little bit of space in exchange for a couple hundred a month in rent/mortgage savings?
When you take stock of what you really need in life, youíll be surprised to find how easy it is to free yourself from the chains of debt and over-spending. Create a personal budget and start living the life you want!