First, the importance of creating a budget…
Like most things in life, if you don’t have a plan and lack discipline, you’re destined to fail. Creating and managing your savings correctly helps prevent financial failure and can help you on your goal towards financial freedom. I’m sure there’s been a time in which you were paid on Friday, and checked your bank account Monday only to realize collateral damage. For most people, one weekend of fun, means 2-weeks of penny pinching to avoid breaking the budget.
It’s important to track your income and expenses so that you can make responsible and financially informed decisions. In addition, tracking income and expenses helps you visualize where your money is going, and when it’s time to implement some self-control to prevent yourself from making frivolous expenses, and more importantly from going broke! In case you didn’t realize, building wealth is all about savings!
So, here are a few things to keep in mind when creating a budget:
Your budget should reflect current and concise information. Make sure you write and calculate everything! Your budget should be a living and breathing document that you adjust as needed.
To make your financial plan concise and easy to follow, it should:
• be simple and easy to understand
• have established time periods for your goals (weekly, monthly and yearly)
• include an emergency fund contribution
• include all sources of income and expenses
If you’re running a joint budget, communication is key! Anyone contributing to the budget should be in agreement with decisions, and any changes should be open topics for conversations. Like I said, your budget should be a living document, so don’t be afraid to make changes.
Lastly, most people tend to focus on cutting expenses, but you should also focus on finding new sources of income. After all, it’s all about cash flow.