The number one thing you need to do when you start managing your own finances is to understand how to budget. It does not have to be a complicated spreadsheet that only a CPA or an attorney can figure out. It can actually be as simple as writing down all of your expenses for one week and then determining how much money you can cut from that to save.
Creating a budget can help you with more than just building savings, however. It will help you live within your means, develop wise financial habits, prepare you for financial emergencies, and help you reach your goals of owning a home or paying for school.
It is not enough to just create a budget one time. A budget should be a living document. You should look at it frequently, monthly if possible, and make adjustments throughout the year. Being able to track your expenses on a regular basis will help you coordinate your financial decisions with your needs and goals, which will change over time.
To create your first budget:
- Estimate your income from all sources.
- List set expenses.
- List estimated amounts that you spend regularly for household and living expenses; these can change from month to month (power, water, gas, food, etc.).
- Keep all your receipts and keep all your bills going back for one year.
More often than not, people lose control over their finances because of a major one-time expense. Don’t get caught in that trap. If you’re already trapped by debt, consulting a College Station bankruptcy lawyer may be another step in getting your finances back under control.
Good record keeping takes less than 10 minutes a week, and will save you money over time, launching you on your way to a successful financial portfolio.