Did you know that April is Financial Literacy Month? Take advantage of the additional financial info available to learn how to better manage your money and secure your future. The first step toward financial literacy is budgeting: how to build your budget and stick to it. Read on to learn how budgeting basics can up your financial literacy and help you reach your financial goals.
What is a Budget?
Simply put, a budget is a tool that you can use to make sure that you are spending less than you earn and living within your means. A budget can help you understand how much money is coming in and where the money is going when it goes out. This tool can also help you:
- Create savings goals
- Plan for the future
- Have more financial peace of mind
Where Do I Start?
The first step in creating a budget is to take stock of your current financial situation. Look at the past few months of your bank statements to see how much money you had coming in and how much money you had going out. Don’t just look at your bank accounts, but look at your credit cards, too. Then, write down where every penny came and went throughout the month and put this information into categories like rent, groceries, recreation, cable, etc. Be as specific as possible. Once you understand your financial past, you can start thinking about your financial future!
How Do I Create a Budget?
Once you have a list of where your money goes monthly, you can start developing a budget. Review your list from the previous months to see where you may have been spending more than you intended to. Find areas where you are spending more than you want to—or more than you need to—and make a resolution to cut back. For example, if you only meant to spend $25 on movie tickets last month but ended up spending $100, that might be an area you would want to cut back on. Think up some financial goals for yourself and set up your new budget to match. Here are some things to keep in mind:
- Be realistic. Don’t set goals that will be too hard for you to achieve right away, or else you will be setting yourself up for failure. If your goal is to save $1,000 this year, try saving $75 per month instead of $1,000 all at once. The more you set yourself up for success, the more successful you will be with your budget.
- Use tools to help you be successful, and write your budget down instead of keeping mental notes. Use pen and paper, a spreadsheet or even a budgeting app such as Mint.
- Update your budget daily, not weekly or monthly. Taking control of your spending every day will help make sure you capture every expense, even the small ones that may seem insignificant. It will also help you easily identify when you are spending too much in one area.
Where Can I Learn More About Budgeting?
Budgeting is a learning curve and the more you educate yourself, the better at it you will become. You can access financial literacy resources online or through your bank or financial advisor. A few great resources include:
- http://www.moneymanagement.org/Financial-Education.aspx
- https://www.practicalmoneyskills.com/
- https://www.occ.gov/topics/community-affairs/resource-directories/financial-literacy/index-financial-literacy.html
Creating a budget can help you achieve long-term savings goals, like saving up for a down payment on a home. If buying a home is on your list of priorities, the NC Housing Finance Agency may be able to help make home ownership happen for you. Learn more about home buying resources available at www.nchfa.com/home-buyers.
