Let’s face it, there are plenty of people out there who realize they need to take control of their personal money matters but have no clue about where and how to begin. Admittedly there are tons of programs available for those with computer skills, but what about those who are unfamiliar with computers or regard themselves as non-technical types?
Relax. The situation is not as desperate as it might appear. Think back a generation or so ago. How did people budget back then? They didn’t have computers, but they did get organized and build plans.
Create a Budget Sheet
The first step in personal budgeting is to create a budget sheet. A budget sheet is an orderly way of accounting for all the cash you take in every month then balancing that figure with the money that you pay out during that same period. You really don’t need a computer if you follow a few easy steps.
How to Create an Effective Budget
Collect all your paid bills, checkbook registers, account statements, and records of every transaction for the past year. Sort them by month, by category. The next step is to begin listing them categorically. The best way to begin the process is to use an accountant’s worksheet comprised of a dozen or so columns. Each column should bear the title of the specific expense categories you found during your sorting process. for each month.
For example, most people have repetitive monthly expense categories. Those include: rent, car payment, groceries, clothing, electric, heat, cable, donations, entertainment, restaurants, dry cleaning, auto expenses, insurance and whatever other regular occurring cash disbursements occur every month. One category that is important, but often missing, is “investments or savings.”
In so many cases, the budget listings you come up with might be the first real look you have had at your cash flow situation. If you are honest about the numbers, you should have a great idea of the strengths and weaknesses of your budget planning. As an example, if you regularly budget a total of $2500 for your monthly expenses, but you only bring home $2300, the $200 monthly or $2400 annual shortfall is an obvious problem.
At that point, with your budget in hand, you can readily see the columns you have created on your worksheet. Somewhere in that list of figures adjustments must be made to bring you within your actual available budget amount. Again, if your monthly income is $2300, but your monthly expenses are $200 more, what are you going to cut or reduce? When you see your budget in black and white, on paper, it becomes very easy to see what expense categories you can either cut or reduce. $150 per month at the local quick stop store for miscellaneous items? – Well, that may be the very culprit that needs to be cut.
Ways to Help You Prioritize Your Expenses
One way to help determine which items in your budget are necessary and which might be reduced or cut altogether is to identify all expenses as either fixed or flexible. Fixed expenses are those line items such as mortgage, rent, car payment, insurance premiums, taxes, insurance premiums, tuition and utilities that must be paid every month.
The budget items – entertainment, restaurants, clothing, dry cleaning, groceries, heat, cable, donations, entertainment, restaurants, auto expenses and savings – are flexible and represent the areas that the budget cuts should come from first. If you’re running out of money before you run out of month, some sacrifices and reductions must me made. Small cuts in many areas can often solve your problems without noticeable overall effects on your living standards. Fewer movies every month, cutbacks on dining out or eliminating the cost of wine from the bill and even fewer visits to the dry cleaner can quickly make up for the $200 monthly overspending. If those don’t do it, you’ll then have to go back to the fixed expense list and see how you might save there.– Do you consider your cable TV as “fixed”?– When push comes to shove, maybe that expense needs to go into the flexible category and either reduced somehow (get a different service plan) or possibly canceled until you can fit it back into your budget at some later point.
You Don’t Need No Stinkin’ Computer
This basic and relatively simple approach to budgeting can work just as well as a computer budget program. The old fashioned, non-technical pencil and paper method may well be the ideal way for you to budget and get a true hands-on feeling of where your money goes each month – without a computer.