Doing a budget and sticking with it is frankly pretty boring. But there is one fact that makes doing one a little more interesting. Most millionaires do a regular budget. They know how much money they have, they know where it’s coming in and where it’s going out.
I’m frankly a big believer in doing what works for you. If you live well within your means, maybe you don’t need any kind of a budget at all. But if you don’t, it would help you to understand where your money is going.
Here is what you do. Open a spreadsheet, get out your credit card statement and your checkbook and figure out what your monthly expenses are. You don’t have to be accurate to the penny or even the dollar, estimates are fine. This is not about figuring out if you spent $102.29 or $98.53 at the grocery store. What this is about is, do you spend $25, or $250 a month buying drinks after work? You may find your big expenses aren’t what you think. Gas prices may stick in your mind because you look at them as you drive down every street. But it may be that eating out, or all those pay cable channels may be the surprising expense. Now compare that to your monthly income. If your income exceeds your expenses by 15%, and you manage to save a bunch of money every year, great.
If not, now comes the hard part. Figure out where you can make as many comfortable changes as possible. Eating out once a week less, having someone clean your home every three weeks instead of every two. Bring it well within your income. You’ll have emergencies, and you want to save money every month.
Once you’ve done that, come up with an easy comfortable way to track those expenses. Again, not to the penny, unless you will stick to doing it. But something you can do when you balance your checkbook, just to have a good idea of where you stand and how things are changing.
Doing a budget is no fun. But there are few things more ‘fun’ than sleeping well at night knowing you live easily within that budget.