The first rule of personal finance has always been creating a budget. While some people don’t use any budget, others feel they’ve got their budgeting system stored in their head. They are satisfied to know they have a ‘good idea’ of how they spend their money.
It would be nice if we only had one or two financial matters to concern ourselves with each month but unless you are a teenage student with a part-time job, there will be multiple factors influencing your finances. The only tried and true way for developing a successful and useful budget is to commit it to paper.
Why Physical Budgets Matter
A budget is more than a list of numbers. It should be an interactive tool you use faithfully to determine your every money move. A budget spreadsheet is very simple to develop but in order for it to be effective, you must supply it with the right information. It can be easy to overlook certain aspects of your finances so if you are not confident you can map out a proper budget, there are many budgeting worksheets available that provide popular categories of expenses you may forget. By using a template version of a budget, you can customize the information to meet your needs.
By putting all of your financial data on paper, you actually get a true visual picture of the facts of your finances. For some people who are putting the data down for the first time, they actually experience shock at just how much they are spending and how much money they don’t really have.
A physical budget is also an essential part of family finances. Even if just one spouse/partner controls the cash flow each month, everyone in the family old enough to tackle family finances also needs to take an active participation in family budgeting. Without a proper paper or electronic budget spreadsheet, it will become impossible to express how the finances work.
Commitment to Your Budget Matters
It is not enough to fill in the blanks of a budget worksheet once, never to return. A budget should be an interactive and regular part of your week. You should continue to update and rework the numbers of your budget and eventually it will become habit for you to commit to progressive budgeting strategies.
When income changes, when bills increase or decrease, or when cuts need to be made to save more money, a budget that is kept up-to-date will help to accommodate these changes with ease. It will prevent you from having to start over from scratch time and time again. If a major lifestyle change occurs such as job loss or medical issues, a current budget will be able to show at a glance how to plan for the changes necessary.
Numbers in your head will never work. You need to first track where you are spending your income and then get to work on committing to a physical budget. It truly is the only way to stay in the know on all of your financial matters. Guesswork does not make anyone financially savvy or financially stable so it is in your best interest to sit down with your money matters and construct the start of your budgeting life today.
Debbie Dragon is a professional freelance writer, specializing in personal finance. She frequently writes for Vertex42.com which offers a large selection of free spreadsheet templates and financial calculators.