Rich Snail

First time here? You may want to read more about Rich Snail or even receive regular updates via a RSS feed reader or by email. Good read!

By tracking your spending, you know where your money goes. It is time to set up a budget. What is a budget you may ask. It is a plan that shows what money you plan on spending. You may be afraid of making mistakes drafting it; you may feel like it will end up all wrong; and it most certainly will as you can not accurately predict the future - if you can, please send me an email!
So why do you need a budget?

Budget = treasure map ?

A budget will help you think ahead. It is here to help you achieve the goals you defined and refined. This is why I see it as a treasure map. It set all the little dots you have to link in order to get to the final line, all the check-points you have to go through to reach the cross mark, all the obstacles to overcome before reaching your reward.

Spending Plan

But before celebrating, you have to draft your budget. To get you started, you simply have to take a piece of paper, and ask yourself 3 questions:

• Expenses - How much do you need to spend to maintain your lifestyle? To answer this question you should list down all the expenses you will make over the coming month(s). All the ones you are tracking on a daily basis should be here, plus a few more representing large expenses you foresee (house repair, vacation etc.)
• Income – How much will you bring home next month? I’m sure your know the answer to this one. Straightforward answer.
• Debt – How much is your minimum repayment? You should list down all your debts, along with their minimum payment. By minimum payment I mean the one you can not escape.

Once you’ve done that, you can arrange it in a spreadsheet. Following your current assumptions, do you have something left at the end of the month once you deduct your expenses and your minimum debt repayment from your income? If you do, congrats! You are saving money. If you don’t, play with the figures (reasonably of course) so that you get a positive bottom line. Imagine how much you would save, and how your life would be without cable TV.

Work in progress & Tracking

You should consider the budget / spending plan you just drafted like a work-in-progress. It will certainly evolve over the next few weeks and months. It will evolve thanks to your reviewing it with your tracking sheet. Your tracking will help you come up with more accurate figures. You will also add some expenses which you first forgot to write down. You should review your budget on a regular basis, and draft new ones for the coming months / years even more regularly. Try to see it as a game.