There are lots of ways to approach budgeting, from the casual and informal to the complex and systematic. But the basic steps are tracking your expenses, writing down your projections for the year to come and what your expenses will be. Then, based on an analysis of your current and anticipated spending, you can track and analyze how you're doing versus your projections. Here are some tips for setting up and maintaining a spending plan:
- Start as soon as you can. Tomorrow is good. Now is better.
- Put your spending plan in writing and keep it in sight.
- Save unexpected windfalls, such as a bonus, that birthday check from Aunt Millie or the net proceeds from your last garage sale.
- Use your budget to evaluate your true costs of such fundamental activities as the per-mile cost of driving your car, staying in your own home for one night, or shopping at the gourmet store for staples such as milk and butter.
- Eliminate expenses for items or services you never or rarely use.
- Before taking on a new pet, evaluate the impact on your budget, including the costs of food, training, medical care, grooming, and caring for the animal if nobody's around during the day or you take a vacation.
- Know where you can skimp and save—and where you can't. Having a haircut every six weeks instead of every four probably won't hurt you. Seeing your dentist only once a year instead of twice might have some severe consequences down the road.