Most people say they don’t have the discipline to budget and save their money, but it can be a lot easier than you think. Whatever the state of your financial life, developing a sensible budget will allow you to better manage your spending. And that is a great feeling.
Your Cash Flow
The key to successful budgeting is knowing your monthly spending needs and habits. Creating a budget means tracking your personal cash flow -- how much money comes in and how much goes out. Adding up your monthly income is easy, but tallying up all your spending takes a little more effort.
First, collect all your bills, your credit card statements, your checkbook register, and receipts for your groceries, gas or anything else you buy with cash. Track your expenses by making entries in a notebook, or use a money management program such as Quicken or Microsoft Money. Those programs make budgeting easy. They really are worth the investment and often can be found discounted at computer retailers or bookstores.
Divide your spending into fixed costs -- such as mortgage payments, rent or loan payments and variable spending, which includes categories such as clothing, food and entertainment. Although you may be able to reduce your fixed costs by, say, refinancing your mortgage to get a lower interest rate, in most cases it is much easier to trim your variable spending.
Once you have a handle on your spending, you can easily determine which costs you can cut and which you cannot. Often, as soon as you see how much you are spending on your morning cappuccino and doughnut, you will be motivated to cut back. Keep motivated by setting goals. Your goal should be to save at least 10 percent of your pay each month. But start by doing what you can and gradually bump it up.
Finally, keep a goal in mind of why you are living on a budget. Promise yourself a modest reward for your efforts. Make it something you love and don't often get to do. Blocking out some personal time for an activity you enjoy or just to relax is a great, inexpensive way to reward yourself for all the hard work.
Lastly, here are some helpful savings tips that can get you started on the road to better managing and saving your money.