How to Budget Your Expenses

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One you have done all of the above, you have basically prepared your "expense report". And not only does this report give you something concrete to budget on, it also gives you a clear picture of your financial expenses and helps you track the movement of your money.

Review it!

The 2nd step in my 'How To Budget' plan is to review the report you have prepared. There is essentially one thing to do: Trim it. And there are multiple ways to do this.

• Expenses such as cable TV, magazines and other things that you may have subscribed, think about the real purpose of these things. Must you necessarily have them? If you aren’t using them to begin with, time to cut the subscriptions, Captain Obvious.

• Keep eating out budgets to a minimum. For working adults, this refers to your lunch budget. If you must spend on lunch, ensure that you max out every penny or keep the lunch budget to as low as possible. After all, it's just a meal and it doesn't matter if you have sandwiches or a 10-course meal, so just trim it.

• Bills and invoices; please ensure that they are paid on time. You must know which services charge late-fees or hidden late-fees. Cable and phone bills for example generally charges “reconnection” fees instead of late fees.

• Take out whatever that does not mean much to you. Why spend on things that don't really matter.

• Lastly, although the idea here is to trim it, you'll need to budget in accordance to your wants and needs. Everybody's wants and needs are different. Never compare budgets, never try to match someone else's budget. If there's something that you truly want, then by all means include it in your budget. This is your budget, let it reflect what you want in life.

Once you have fully 'Reviewed' it, take your income (Use take-home pay if you are holding a job) and subtract that against your budgeted expenses. Do you have a positive figure?

If you do, that's great but if you have a negative balance, you're in trouble. TRIM MORE! Look at every small expense that you could reduce as well because they are equally important.

Beware of little expenses: a small leak will sink a great ship.

- Benjamin Franklin -

If you have a positive figure, then it means the budget you’ve just drawn up is something worth sticking to. The trimming of the expense report will enable you to think, analyze and decide how to spend less of your money.

And once the report has been thoroughly trimmed, you have created a budget that you now need to follow to ensure that you spend only in the right areas and spend only the right amount.

Stick to it!

Now that you know how to budget, the final most important step is to follow it through and through. This budget is your ticket to financial success and the key to sticking to a budget is to ensure that you can only spend what you have budgeted.

Try carrying the same amount of cash that you have budgeted. If you have more cash than the budget, you will spend more than what you have budgeted. If you only carry what you have budgeted, you can only spend that much.

If you are concerned about carrying some cash for emergencies, don't. If you are in an emergency, you can find ways to get money when it happens. If you carry extra cash for emergencies, then make sure you have the discipline NOT to touch these cash WITHOUT REAL emergencies.

If you aren't disciplined enough (like how most people aren't either) and have the tendencies to spend "emergency cash" for non-emergency expenses, then don't carry any emergency cash. JUST CARRY YOUR BUDGET.