Only a small fraction of the entire American population religiously create a financial budget. Many just prefer to wing it. If there are bills to pay, then they are paid as they come. If there is money coming in, then use it however way you can. But because you don’t budget, you don’t actually notice how much money you’ve wasted.

Creating a budget—daily, weekly or monthly—will help you spend within your means. It will even give you some leeway to have some savings. A budget is essentially a guide on how you spend your money. This way, you don’t overspend or waste money on unnecessary stuff.

But if budgeting is so good, why aren’t people doing it? Here are a couple of the challenges why individuals prefer not to budget.

Labor intensive

Budgeting is hard work. First of all, in order to gauge how much you should spend in a day, a week or a month, you have to track your daily expenses. With that, you check on the items that you absolutely need and put it in the budget for the next month. This way, you will also be able to identify your expenses: utilities, food, housing expenses, groceries and others. You don’t have to be too strict with the budgeting. It doesn’t say that you have to include only the necessary stuff when doing the budgeting. Put in entertainment, clothing a new bag or whatever makes you happy. That is if you have the funds for it. Once you have an approximate of how much you spend every month, you then start to weed out the unnecessary items that will put you over the budget.

Once you’ve established the budget, you have to continue tracking your daily expenses in order to make budgeting sustainable.

Variable expenses

Expenses are not the same every month. Take for the example electric bills. It is not the same every month. There are times when your electric bill is high and there are times when it’s low. It would be hard to make a definite budget with such fluctuations. But you can approximate.

Budgeting is a lot of work and it even keeps you guessing. Chances are people will be turned off by the work that budgeting needs especially since majority of the work is mental. With an already mentally, physically and emotionally challenging life we live in, putting an additional strain to our brain is not very attractive. However, with the steep expenses involved in everyday life, budgeting has become important and even essential to mothers or homemakers. But according to Money Crashers, only 40 percent of American families actually have a monthly working budget.

Also, no one is too old to ever start budgeting. While it is better to start budgeting at such a young age in order to make it a habit, the good practice is actually for any ages. So if you are just start to create budgets, here are some tips.

Decide to start a budget now!

How often do we hear this phrase: “next time” or “next Monday”? Don’t you get tired of hearing it at all? Worse, don’t you get tired of saying it? So the first thing you should do is to actually decide to start a budget—NOW! Not next time; not next Monday. Starting is actually the hardest part. Sustaining it is quite hard, too. But once it becomes a habit, it’s actually quite easy and fulfilling.

Determine how much money you have every month

Collate your monthly income and other resources. Know your monthly spending capability so that it will be easier to create a working budget. If you have a fluctuating monthly income, be conservative. Choose the minimum amount as your base. This way, you might even have extra money to set aside as savings.

Calculate total debt

This is very important. The budget will look better without debts or loans. So if you have some, try to pay them off as soon as you can. When you create the budget, start with appropriating the minimum amount of payment you can make for your debt or loan. When you’ve itemized everything in the budget and notice that there is extra funds left, maximize debt payment. Make a habit of paying off debts as soon as you can because interest rates are additional expenses you don’t need.

Also, never forget to put debts in the budget because penalty fees are also expenses you don’t actually need.

Identify recurring monthly expenses

Your regular monthly bills include electricity, water, credit card, insurance, car and housing, plus groceries, entertainment, food, and if you have children—education, allowance, etc. You don’t have to be very specific about it, you can categorize expenses.

Computerize your budget

Computers will simplify budgeting tasks. With the existence of excel and other budgeting software, you would not need to keep papers and receipts of your daily, weekly or monthly budget. Everything is in the computer and sometimes, with just one click, recording will be quick and immediate. Your long-term budgeting will no longer be as taxing. Here are some of the most reliable software—aside from the old Microsoft Excel: Mint, You Need a Budget and Mvelopes.

Check the bottom line

The most important thing in the documentation is the bottom line—the numbers at the bottom of the ledger or budget. This will indicate if you have overspent or not. It reports if you still have enough money to be put in a savings account.

Make adjustments

Based on what you found in the bottom line, make adjustments. If you seem to have underspent but you still have pending loans or debts, then increase your budget for debt servicing. But if you have overspent, then you might have to minimize some of your expenses, particularly those that you can live without.

You don’t need to be an expert in order to be good at budgeting. You just need be serious about managing your finances in order to be fiscally healthy.

Author's Bio: 

James Harnberger is an Enrolled Agent admitted to practice before the IRS, an NTPI Fellow, a credentialed paralegal in tax law and a champion of IRS reform.

He is also known as the Wealth and Tax Guru. Contact James and his team when you need help with taxes