Building your Budget
A budget allows you to keep track of how much money you have, how much you’re taking in, and how much you’re spending so that you can plan ahead.
It might sound like a lot of work, but it’s actually pretty simple and the results are worth it. By spending just a little bit of time creating a budget, you can save yourself hundreds, or even thousands of dollars a year. To build a budget, you need to assess your current financial situation. This will give you a strong base to build from as you start to learn better financial habits.
The first step in assessing your financial situation is to figure out how you spend your money by tracking your spending for a month. Write down how much you spend and what you spend it on, as well as the money you give to your children or other family members and other miscellaneous expenditures. You should write down everything-every bill, every grocery list, even every cup of coffee.
Also, save all of your ATM and other receipts. No expense is too small to record in your notebook because small expenses will eventually add up to big ones.
Your Net Worth
Your net worth is a measure of your financial well-being, or your wealth. The higher your net worth, the better off you are financially. Ideally, if you manage your finances responsibly, your net worth will grow over time.
Goal setting is something that you should do with your family or the people you live with. You may also want to involve your older children, especially if achieving certain goals will require changes or sacrifices on their part. Make sure that your goals are realistic:
- The more you depend on luck to achieve a goal, the more that goal is probably unrealistic. If you set unrealistic goals for yourself, you may get discouraged and give up on them.
- It is better to set small, achievable goals and once you accomplish them, establish a new set of achievable goals to work towards.
Once you have decided on your goals, its time to create a written plan to carry out each of them. To do this, record each goal on your Financial Goals Action Plan Worksheet, under the appropriate heading: Short-term goal, Mid-term goal, or Long-term goal.