The key to building wealth is simple: spend less money than you make. Although, if you aren't tracking your spending, that may be easier said than done. Fortunately, anyone can learn how to make an easy-to-follow budget with a few simple tips.
The first step toward creating a budget is learning to track your income and expenses. You can use special financial planning software or create a basic spreadsheet. Tracking your money consistently is more important than using the fanciest software or complicated charts and graphs.
Your budget begins with keeping track of the amount of money you earn and the amount of money you spend each month. To understand where you are spending your money, divide your expenses into several different categories. Track your mortgage or rent, your utilities, and basic categories such as groceries, car expenses, dining out and entertainment.
If you are making a spreadsheet, create a row for each spending category and fill in the money as you pay for things throughout the month. You can use the spreadsheet's auto-sum function to add up your expenses, then compare the total to the amount of money you earned in the same period.
After you track a month of your typical spending, take a good look at the numbers. Did you earn more money than you spent? Do you have enough money left over to pay off credit card debt, save for retirement or put toward other goals?
Once you start keeping track of how you spend your money, you can start setting goals for how to adjust your budget. You won't be able to change the amount of some of your expenses, like your rent or utilities, but you can control how much you spend in other areas, such as dining out, entertainment and clothing.
Look at each of the spending categories that you have created and set a goal for how much to spend in each area. Be sure to add a category for saving a set amount of money each month. When you add up the amount you are planning to spend in each category, the total should be less than your monthly income.
Now that you have goals for how you will budget your money, it's time to start meeting them. Follow your budget by checking your progress regularly throughout the month. Once you've hit a spending limit for a category, don't let yourself spend any more in that area until the following month.
Learning to follow a budget takes practice, but you can learn to manage your money over time.
Copyright 2012 Scripps Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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