Need help creating and maintaining a budget for the first time? Here are the most common questions we get at Mint.com from first-time budgeters:
Should I establish goals from the beginning?
When creating a budget, it is important to give equal consideration to long term and short term goals. In order to determine what types of goals should be set and when, ask yourself specific questions like:
- Do I want to develop a plan for retirement?
- Am I saving for my college education, or do I need to set up a fund for my children?
- Is it necessary to set up a fund for large expenses such as a vehicle purchase or a mortgage?
- Do I have any big-ticket, short-term goals, like a new appliance or a summer vacation?
These questions will help you develop a set of financial goals, and create a timeframe for achieving them. For example, saving for retirement is considered a long-term goal, and creating a travel fund could be considered a short-term goal.
Choose a budgeting system that feels comfortable for you.
Should I use paper, spreadsheets, software, what?
To create a rough draft of your budget, choose a system that feels comfortable. While some prefer to work directly in an Excel spreadsheet, others prefer writing everything down with pencil and paper. If you are comfortable on the Web, a budgeting tool like Mint.com makes it easy to organize everything into categories, and create a system of reminders.
Is a budget just about paying bills?
No! Creating a budget does set up a system by which you can pay your bills on time, but it is so much more than that. In addition to bills, you should also be setting funds aside to:
- Save for educational plans: either starting a new degree program, or furthering your own education.
- Save for retirement: this is especially important for those who are not comfortable relying upon the Social Security Administration, as well as those who do not have the opportunity to set up a retirement plan through their employer.
- Save for emergencies: anyone can experience unexpected medical situations, the loss of a job, or the death of a loved one. Even though no one likes thinking of these negative situations, it is important to plan for them by putting aside savings.
- Pay down debt: creating personal wealth through budget strategies cannot occur until debt is paid down and investments are put into place. These are important ingredients to a successful budget and should be part of your long-term goals.
How often should I update a budget?
Even though the initial budget is the template for all future budgets, you should revisit your budget every few months, or whenever your financial situation changes dramatically. This is especially true for those who have fluctuating incomes. These fluctuations should be updated within the budget, in case you need to make spending adjustments to stay within your budget.
It's also important to look for trends in your budget. For example, over the last two months, it may become apparent where you can reduce or eliminate certain spending habits. You can also look for where you can save money, shift money between different accounts, or pay down bills.
Mint makes it easy to create your first budget, and stick with it to achieve your financial goals. Sign up for your free account.