One of the most basic and most important ways to build net worth, is to save more money each month. Increasing savings requires a budget.
A budget allows you to see where you are overspending and to take corrective action. The most important part of a budget is constant review and discipline!
Now it's your turn to determine your budget. Having a written budget is very important as it prevents you from "cheating". You can create a plain budget on a piece of paper, or you can create a spreadsheet to do all the calculation for you. In the resources below, a free budget spreadsheet is provided.
The basic budget should include a "Planned Budget" and "Actual Budget" (where you document what actually happened). As you consistently review your budget each month, you will discover ways to save even more money.
Here are some basic instructions for filling out a Budget Worksheet:
Fill out the first column on the spreadsheet labeled "Planned Budget". This is your GOAL to achieve each month. This column will represent the amount of money you hope to spend in each of the given categories.
Fill out the "Actual Budget" as the month progresses. This will help you see where you are overspending.
Compare the Planned Budget to the Actual Budget at the end of each month. As you focus on saving money, you will surprised at the many different areas in which you can cut back your spending!
Also, note on the Budget Spreadsheet that some of your expenses are "Necessary" and others are "Discretionary". Try to eliminate as many discretionary expenses FIRST, and then look to other categories to save even more.
You should continually assess where your budget is each month and you will notice your net worth increasing.
For a free budget calculator and a continuation of this article, see the resources below.
