The average American owes $8,329 in credit card debt: How to budget your way to freedom

How many people do you know who would be excited to spend Friday night budgeting, but the truth is that budgeting is possibly one of the most important things you can do as you begin your adult life and career? Still, budgeting isn’t something everyone learns in school. Learning how to make a budget that can really help you manage the money and assets you have is something that takes a bit of patience and dedication, but the results are definitely worth it.

First things first, before you can start budgeting, you’ll need to get organized. When you’re ready to start budgeting, take a little trip to your local office supply store and grab an accordion folder with at least ten different slots. If you already have a filing cabinet, great! Clean out a drawer for all your budgets. Grab some pens and pencils because you are going to create some labels for your file cabinet or accordion folder.

When you’re all set and ready to budget, you’ll need to find some information first. If this is your first attempt at budgeting, it will take a while to collect all of your paper and electronic statements or balances. In addition to your bank statements, you’ll want to get copies of your loan payments, cable bill, water and sewer bill, rent, and paycheck stubs. These records will allow you to keep track of how much you earn and how much you spend.

The hard part is done once you have that information in front of you. You are ready to budget now. Get some lined paper, or better yet, open a new spreadsheet on your computer. Start a column that represents all the income you earn in a month, and start another column that represents all the money you spend during the month. Next, review each line item and assign it to a category. For example, your car insurance, oil change, and gas might go under a category called “auto,” while your trip to Walmart might go under “groceries.” Once you have listed and categorized each line item, summarize each category and look at the results. Are you spending more than you earn? Are you able to save money each month? Are you spending more on groceries than you thought?

This is where the power of learning to budget comes into play. Set spending goals for each of the categories you listed and try to stay within that limit. As you spend money, organize your receipts or write notes and put them in your accordion folder. Sometime in the middle of the month, roll it all up by category and see where you stand. Does it look like it’s going to be within its original target? You’ll end up? You can then make adjustments to your expenses. That’s probably a lot to take in if you’ve never kept a budget before, but it can be the difference between taking a vacation this year or not. When you learn to save money using the techniques I’ve shown, you allow yourself to do things that didn’t seem possible before.