People avoid creating personal budgets for a lot of reasons. The most common reason, however, is that it involves confronting your finances and staring reckless spending in the face. It’s a tough proposition, but one that is absolutely necessary if you’re going to be responsible and in charge of your own life. The very first morning that you wake up after creating your budget, you’ll feel more aware and more in control of your own destiny than you did the day before.
Different Kinds of Budgets: There are a Lot, but You Only Need 1
As discussed in the article “9 Methods for Budgeting Success,” there are 56 million ways to draw up a budget – literally. Google the phrase “how to create a personal budget,” and that’s the number of results you’ll get. The point is, there are a lot of different ways to create a budget, and the glut of options is exactly what stops so many people from doing it in the first place. From the old-school envelope budget to the unforgiving zero-based budget to the masochistic penalty budget, there are more options than there are dollars to budget in the first place.
But an overwhelming amount of options is no excuse. Yes, you’ll have to do some research to choose the right method, and the process of trial and error may eventually convince you that you started with the wrong one. The fact is, however, that taking the first step of picking method is far more important than which strategy you choose.
Software isn’t Necessary, but it Sure Helps
There are always going to be traditionalists and technophobes who shun technology because, hey, a big yellow legal pad and a ballpoint pen have worked just fine before today. If you’re one of those people, don’t worry. You can make a perfectly good budget the old-fashioned way. But for those looking for a leg up, take the time to research software like Mint or Wave. This class of software is simple, free and cloud based.
Simple means even the guy with the legal pad could figure it out if he would just stop being so stubborn, free means it won’t force you to put another red entry in the expense column of your brand-new budget. But the fact that it is cloud-based, or remotely hosted, may just be the best feature of this class of software. The software – and all your data – is stored far away on secure servers that a professional company maintains, secures and operates. You don’t need to download anything or worry about your computer crashing. Simply create an account and then you can log on with your password from any computer or mobile device. Unlike people, computers always get the exact calculations correct.
What’s in a Budget?
Whether you use software or write it out on a dry-erase board, virtually every budget has three steps and purposes. First, you need to examine your current spending to identify patterns and habits. Next, you have to develop a system for recording what’s coming in and what’s going out. Finally, you should incorporate goals and implement strategies to help you achieve those goals.
Creating a budget should not be complicated. In fact, the simpler it is, the more likely you are to keep up with it, to follow it and not view it as a chore. Your financial life has three columns: what you earn, what you spend and what you save. A budget can not make you richer, but it can help you keep too much money from floating into that pesky second column. Either way, the path to gaining control over your finances starts with the creation of a clear picture of your situation. That picture is a budget.