We have had several requests from people for help living within their means. Every year problems of debt and overspending frustrate millions of families. The problem has little to do with income and a lot to do with spending. Spending less than you earn is the essential foundation that creates the capital for investing and wealth building. Following the simple advice in this series of articles on budgeting will help you create the wealth necessary to benefit from professional fee-only asset management.

First, keep track of your expenses. Just as most diets work when you have to count the calories, most budgets work when you start counting your expenses. Budgeting works by causing you to ask the question, “Do I really want to spend my money in this way?” Being frugal results from tracking your spending, analyzing your spending, creating a budget, and living within that budget. The order is cyclical because tracking and analyzing your spending makes you aware of waste. Once aware of your waste, you can eliminate it and adjust your budget accordingly. Keeping track of your spending is essential until your spending is significantly less than your income.

Several software programs are available to help you track your finances with less grief and manual bookkeeping. Finding a system that works for you is essential to gathering the information required to aggressively work toward your financial goals.

Once you know where you are currently spending your money, you can compare that to national averages to determine how you should adjust your spending to better meet your financial goals.

We have created a tool to help you get started. It is on our website at http://www.emarotta.com/budget.php.

With our budgeting tool, you can fill in your weekly, monthly or yearly take home pay and click “Create Budget.” It will create a sample budget according to national averages, and help you get started analyzing and adjusting your spending.

The purpose of this tool is to help you get started asking questions about your spending habits. You may not be putting as much as the tool suggests into savings, but it does point toward the most important principle: pay yourself first. Not with more toys, but with cash that is earmarked for long term financial independence.

Plan ahead for those inevitable big expenses. If you don’t have a category where you are putting savings away, then when the car dies, the roof leaks or you need new carpet your credit cards will have to cover the additional costs. Ouch! Most emergencies can be avoided by lifestyle adjustments and savings foresight.

By comparing your spending to the sample budget on our website you can identify areas where you may want to adjust your lifestyle. For example, you may find that your house payment is a larger percentage of your income than the tool suggests. Moving into a less expensive house may be one option. Alternately, if your current house is a priority, reducing your standard of living in other areas may be the sacrifice you need to make to continue where you are currently living.

Those who have kept a budget appreciate the wisdom it provides; helping them make adjustments and smart lifestyle choices that will keep them on track to achieve their long term financial goals.

Next week we will examine some ways you can easily reduce certain expenses.

Photo by lee bernd on Unsplash

---

See also:

• Budgeting Part 1: Creating a family budget
• Budgeting Part 2: Living on a family budget
• Budgeting Part 3: Reduce Your Spending