Yesterday we discussed setting goals to start the Financial New Year’s Resolution process. With goals in mind, you can now take the most important step in any financial planning process:
Make a budget.
Money solutions blog readers are familiar with personal budgeting; in fact, our most popular tip of the day is our tip on how to make a personal budget. The most popular page on the Moneyproblems.ca web site is our page on household budgeting. There is lots of information on this site, and on the internet, to teach you how to make a budget. And yet, despite all of the information available, the number one cause of financial problems is failing to monitor your personal finances with a personal budget.
Why? Because we all think making a budget is difficult. When you first start, it is difficult, just like riding a bicycle was difficult. But, with practice, you learned to ride a bike, and now it’s easy, and budgeting can also be easy.
Start with a piece of paper (or an Excel budgeting spreadsheet, or an easy to use computerized budgeting program like Calendar Budget), and write down what comes in every month (like your paycheque) and everything you spend money on in a month. Does your budget balance? If more goes out than comes in, you need to cut your expenses, or increase your income.
The point of a budget is to have all of the numbers in front of you, so you can make decisions. What can I cut back to balance my budget? How can I free up money to save money? By making a budget, you have taken the first step towards financial independence, so start today. Making a budget is your most important New Year’s Resolution.