You really ought to have a budget. But you knew that.
Pretty much everyone knows that. But so few of us actually do sit down and figure out how much we actually have free for stuff like, you know, food, and books, and maybe a movie now and then. That’s a mistake – a huge one.
When it comes to managing personal finances, having and using a budget is absolutely essential. The good news is, it’s not as hard as it seems. Here’s what you need to do:
1. Write down your expenses.
First thing you need to do is figure out where your money is going. How much do you spend, and on what? Pull out your old bills (rent, credit cards, receipts, etc.) to get a clearer picture. Don’t forget things like entertainment, clothing and other major expenses, and include some money for savings. Give yourself a few months to fine-tune this to match your exact spending habits.
2. Estimate your monthly income.
You know how much you spend, now figure out how much you have. Only include money you know you’ll get every month – your mom may slip some cash in a care package every now and then, but unless you can count on it, don’t count on it.
3. Do the math.
If you have more going out than you have coming in, start looking for things to cut. Entertainment bills are an easy place to start -- a lot easier than your utilities and rent, anyway. Keep cutting, and then cut some more, until your income beats your expenses. It’s not always easy… but it is simple.