A realistic and well-thought out budget will make money management easier. What is a realistic budget? You need to realize that even though it is important to reduce your spending on frivolous things and daily trips to vending machines, there should still be a budget section for entertainment. You won’t feel deprived while managing your money. However, once the money has been spent for the month, your spending must stop.
Start by listing all your monthly fixed expenses when creating a budget. These expenses include rent, mortgage, insurance, phone, Internet, and electric bills. Also, their amounts.
Each item on your list should be carefully examined. Some items may not be possible, but there are likely others you can cut out or pay less for. Your phone bill is a classic example. People pay too much for both a phone and a landline. You can cancel your home phone subscription if you have reliable home cell phone service and a great cell phone plan. Switch to a pre-paid card if you feel that you are paying too much cell phone service. A $20 card can be used to extend the validity of your account for the whole month. This will help you manage your money more effectively.
Once you have analyzed your fixed monthly expenses thoroughly, you can now look at what you spend on variable expenses like groceries, meals out, gas, cable and clothing, as well as entertainment such as movies. You should have a realistic picture of what you are spending in each category. This will enable you to adjust realistically.
Another classic example that can destroy money management efforts is dinner out. You and your partner will spend around $200 per month if you eat out at least once a week. This depends on your personal taste.
While it is fine to treat yourself once in a while on special occasions such as birthdays and anniversaries. However, you will be throwing your money away if you eat out a lot. You can limit the amount of time you can eat out, as long as it is within your budget. You can eat out only once per month if you have the financial means.
Your budget is the first step to money management. After you have established a monthly budget, create envelopes and label them accordingly. One envelope can be used for groceries, while another one is for movies and gas. Place the exact amount you have budgeted into each envelope. You will need this money to last you a month. Be patient. You can save money or treat yourself with extra money if you have any extra money at the end of each month.
You will have good money management skills if you are able to stick to the budget that you set.