What is a budget?A budget is the itemized summary of income and expenses for a given period of time (monthly, quarterly, annually). A budget helps you visualize how much income is coming in and where your money is being spent.Why do you need a budget?Budgeting is always a good idea, it’s better when you’ve defined your goals before starting the process. Budgeting can be tedious but it doesn’t have to be boring. What are the reasons to start a budget? Well, they include:Need to meet monthly financial obligations To save money Eliminate unnecessary spending Stopping fights about money Stressing less about finances Less reliance on credit and limit consumer debt Debt freedom Retiring early and more…Many people feel constrained by the word budget and often associate the term with limiting. Budgets are as much about mindset as they are about financial numbers. Budgeting will help you live within your means and push you towards financial success.Why Budgeting is ImportantA budget helps you understand your cash flow (income and expenses) and gives you the necessary information to make better financial decisions. A budget can help you achieve many of your financial goals. Don’t think of it as limiting you from doing what you want to do. A budget is a spending plan that determines if it is affordable now or later down the road. A budget can help you identify areas where you’re mindlessly spending money. It’ll help determine areas to stop spending, cut expenses, and save. A budget can decrease your stress level because you now have a financial plan of action.Already have a budget but can’t stick with it? Read this article: Avoid these Budgeting MistakesWhat Budgets IncludeBefore you create your first realistic budget, you need to know how your spending money and your awareness of financial habits are. An unrealistic budget is nothing more than a fantasy.The first step of the budgeting process includes a clear understanding of where you’re money is going. Ideally, you want to track your spending for a 30 day period. It’s easier to do so on a monthly basis such as July 1 to July 31. There are a few ways to track your spending like:Tracking your spending through a simple spreadsheet inputting your expenses each time they occur. Gather your banking and credit statements and a piece of paper. Write the expenses down. Use expense tracking software like PocketGuard, Mint, and Truebill.Now, here’s a way to categorize the flow of money.Monthly Income. You want to know how much money is actually coming in first.Monthly Expenses. It includes a list of your monthly obligations such as mortgage/rent, loan payments, utility bills, and discretionary spending.Financial Goals. Financial goals are monetarily quantifiable aspects of your life. They are things that can be purchased such as goods, experiences, and education. These goals are things like savings goals, homeownership, student loan payoff, or once-in-a-lifetime trips. What are your short-term financial goals? Want to buy a home or a luxury car? Maybe you want to go on a worldwide trip or se

Track and Monitor Your success in budgeting relies on the ability to track and monitor your progress.

The budget is the blueprint of where you want your money to go. Now, you’ll need to actually track your spending. Using apps like Truebill (read our take on this expense tracking and alert app) can help you keep your budgeting goals in mind. Now that you understand the importance of budgeting and gathered your documents, it’s time to use the simple 3-Step Budgeting Process. Want to read a book on budgeting? Check out the books: You Need a Budget and Get Money. These are affiliate links on Amazon that help us keep the site going.