I'm a firm believer in budgeting. You have to know how much money you have coming in and going out. Making a plan for that money just means that you're in charge of where it goes. But it can be hard to get started, especially if you know money is tight and you don't even want to look any closer at your finances.
Rip Off the Bandage
The first step is that you have to look! Print off a bank statement for the last month and write down what you spent in each major category: housing, food, transportation, medical, etc.
Housing expenses are things like rent/mortgage payment, renter's insurance, and utilities.
Food includes groceries, restaurants, fast food, and those little snack runs to the gas station.
Transportation includes car payment, car insurance, gas, Ubers, public transportation, parking, tolls, etc.
Medical is health insurance, copays, prescriptions, and other health related spending.
These are the major categories that must be covered in your budget! After these things are categorized, take a look at where the rest of your money is going. Make other categories to keep everything organized. These categories might look like debt payments, spending money, entertainment, dates, subscription services, books, kid related expenses if you have kids, or gym memberships.
Remember: A budget isn't about restricting. It's about controlling your money instead of checking in at the end of the month wondering where your cash went.
Consider Your Income
Once you take a look at how much you're spending on average without a budget in place, compare that to your income. Are you spending more than you make, and using credit cards or getting dinged with overdraft fees? Are you dead even? Or do you have some wiggle room?
If you're spending outside your means, you have two choices: reduce expenses or increase income.
I'll be back with another post on how to dig into the nitty gritty details of your spending and identify areas you can cut back.