Knowing where your money goes is essential to managing your finances, which means creating a budget is vital.
You might be surprised at what you learn. Many discover they're spending far more than they realized, while a few pat themselves on the back for saving more than they knew. Whatever the case, it's never too late to start.
Think of your budget as a tool to help you manage money wisely. A key to keeping you motivated all year long is to review your budget to what you actually spent in each category on a monthly basis. Here's what to consider:
- Be honest about your budget. Make sure it fits your lifestyle and keeps you motivated, all year long.
- Don't try to fit your expenses into somebody else's budget categories. Tailor the categories to fit your own situation because finances are personal.
- Make your categories detailed enough to provide useful information, but not so detailed that you become bogged down in trivial details.
- Update your budget and actual expenses monthly.
Review your budget and ask these questions:
- Where is our money going?
- Do we really need to spend so much on this category?
- We spent more than expected in this category this month. Why? What can we do to prevent it from happening again?
- Are we on track with planning for big expenses such as a new(er) car or house?