Practical Steps and Assessment
Practical Steps and Assessment
Since budgeting is not a one size fits all let’s look at some practical steps that can work for everyone – starting with the Budgeting Cycle!
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The Budgeting Cycle:
Phase 1: Prepare – Start at the beggining of the month
Warning:
During this phase you will have to be very honest with your spending and where your money is truly going.
The first order of business in this cycle phase is estimating your income.
- Be sure to only include income you receive regularly such as paychecks, investments, and government benefits as overestimating can lead to overspending.
- Secondly you will need to estimate your expenses – which are how much money you pay. Some expenses are easier to estimate such as rent, gas, and utilities since they are always reoccurring.
Pro tip: Make sure you set aside enough money to cover costs that are not reoccurring such as dentist appointments, gifts, tuition, vehicle repairs, etc.
Lasty, let’s estimate your savings – how much money can be put aside after calculating your income and expenses.
Pro tip: Ensure you don’t forget to save extra for those unpredictable events on top of saving for a financial goal.
Great Job Brainstorming – Our Phase One is Complete!
Phase 2: Create – start at the beginning of the month
Now that the hard part is over you are able to create a budget that fits your needs
Some extra tips to help you get started:
- Ensure you balance your income with your expenses and savings
- Consider the difference between a need and want
- Ask you self some hard questions such as; Are there any small recurring expenses that you can cut?
- Do the numbers accurately reflect your spending habits?
- How much are you willing to spend on groceries per week?
- How often are you eating out and can that be reserved for more special occasions?
Pro tip: Excel has a lot of great built in budgeting spreadsheets that are easy to use and free, find one that works best for you!
Phase 3: Implement
Ensuring that you stay on budget is key in this phase and may require some tracking of you actual income, expense, and deposits to save during this month.
Pro tip: The envelope budgeting system is a great tool to add to your budgeting belt. It involves putting your money into labelled envelopes either real or virtual for different expenses. You set aside cash (or track amounts digitally) in separate “envelopes” for things like rent, groceries, and fun money. Once an envelope is empty, you can’t spend more in that category until the next month. This helps you stay on budget and avoid overspending!
Phase 4: Review and adjust your budget
After a successful month of developing and staying on your budget take the time to reflect where you felt your budget worked best and where it could be improved. Reviewing may seem like a useless step but the more you understand your spending, the better and more efficient your budget will be, creating more savings!
