It’s late at night and you’re up worrying about next month’s expenses: your girlfriend’s birthday present, a planned trip to visit family a few states away, and an unexpected car repair. Add those to the normal bills, and you’re left trying to balance it all out.
You’re not alone.
According to a recent Legg Mason survey, investors spend an average of 80 minutes each day worrying about money. That adds up to 475 hours or a full 20 days each year spent feeling uneasy and distressed about money. Think of all the things Americans are missing out on when they’re wasting time worrying about money.
While creating a financial plan may seem overwhelming, managing money is actually a basic human need, just like going to the dentist and a yearly physical checkup. Why are financial education and the hope for good financial health not in the same category?
Gallup’s 2013 survey noted that the majority of Americans do not budget—only 1 in 3 prepare a detailed household budget. No wonder there’s anxiety surrounding finances. No one knows where their money is or where it’s going.
Balancing checkbooks like grandma and grandpa did or counting coins from piggybanks are dust in the wind. Now, it’s a click of a button to get to the top iTunes song, PayPal for a dress from Brazil, or a mobile payment grabbing coffee.
For a simple step in the right direction, go back to the basics and create a budget. This simple exercise can assist in saving money where needed and keep finances orderly. Plus, your seventh grade home economics teacher would be proud.
There are plenty of great online and mobile resources that, almost literally, fill in the blanks to create a budget in minutes, like mint and Goodbudget. Or, go one step further and put pen to paper. Writing things down and doing the physical work can be empowering.
Building a Budget
Pinpoint the unique reasons that a budget is needed—what do you want to accomplish? Without goals, the budget would be much like a map without a destination.
Review Current Income Sources
Track current income sources, like jobs, investments and side business income, and you’ll clearly see money inflows in one place. Use this as a guide to either pay expenses or put toward goals outlined in the budget.
Review Current Expenses
Record all expenses to see where money is going each month. This step alone may uncover some surprising facts that, with work, could be lowered over time.
Build the Budget
In order to reach budget goals, you may have to increase the level of income, decrease expenses or establish a combination of the two. Chances are, you won’t get your budget exactly right the first time. Life happens—review and tweak your budget accordingly.
When worries start to creep in, think about the budget you’ve created for yourself, and you’ll feel more in control. After you’ve thought through a few of these items yourself, contacting a financial advisor will be the next logical step and won’t seem so intimidating.