Planning A Budget You Can Live On
Planning a budget you can live on is easier than you think. Follow these simple steps to begin realizing your financial goals.
Creating a personal budget doesn't have to mean sacrifice. Contrary to what most people think, living by means of a budget can actually leave you with more money for the things you want.
THE BASICS Do you know where your money goes each month? How much did you spend on rent or a mortgage last year? Do you know how many dollars you shelled out at the movie theater? You probably have a good idea of how much money is coming in, but all too often, people lose touch of where it's going. This is how money troubles begin.
THE TOOLS In order to get a working budget going, you'll need a few basic tools:
1. CALCULATOR: Despite how good you are at adding figures in your head, it'll make the job a lot easier if you can just punch in the numbers and be done with it. When something becomes too much work, we stop doing it. Treat yourself to a functional calculator.
2. TABLET: You'll need something to jot down notes and plans for at least the first few weeks. You can choose a regular notebook, financial ledger or computer program.
3. YOUR BILLS: Grab every bill you can find and gather them together. The only way to get a handle on where your financial future is going is to look at where you stand right now.
DRAFT Most people hear the word "budget" and assume it means they'll have to begin squeezing the life out of every dollar. Not true. A budget is nothing more than a simple plan, which will help to simplify your life. You need to begin with a draft copy of your budget that can be adjusted during the first month or two to allot for expenses you may have forgotten about.
1. WRITE DOWN EVERYTHING! Write down a complete list of your expenses. This includes EVERYTHING. Don't just list the major items like credit card balances and loans. Be sure to include minor, forgotten expenses also, such as movie tickets, gas, car insurance, club memberships and book purchases.
2. When you feel you have a complete list, make sure your outgoing expenses are less than your income. If you owe far more than you bring in each month, it may be time to talk with a financial analyst or bill consolidator.
3. Now, using your list, estimate how much you will spend in each category the following month. It's important not to underestimate. If you feel like you're cheating yourself, you're more likely to stop following your budget. Make a set amount for each category and get it in writing.
4. Using a fresh sheet of paper, create a worksheet for yourself, listing the categories in your budget. Leave room to write down items under each category. One page per category works well. For example, page one could be titled, GROCERY EXPENSES. On page one, you would list all the checks you'll be writing to the grocery store for the next month. This will be your draft budget.
5. Keep your draft budget out where it's convenient. Too often, we have planners and bills tucked away, making organization a chore. If you leave your budget out and log your expenses once each day, you'll make less work for yourself.
GOALS Decide whether or not there are financial goals you'd like to reach. Do you want to put away a percentage of your income for vacation? Are you saving for a house? Retirement? Work your goals into your budget, too. Financial experts often suggest that you pay yourself first. This means if you've budgeted ten percent of your income to your savings account, the first bill you pay is to yourself. Often we cut our savings goals short to make up for expenses in other areas. This is a sure plan to failure.
FIRST MONTH Now remember, the first month is practice. This is time for trial and error. Keep your budget out and log expenses daily. When you've reached the end of your trial month, do whatever readjusting is necessary. See where your money is going and adapt your budget accordingly. This is the time to decide if you want to cut back on your spending. Do you shell out more for coffee breaks and movies than you realized? Are you spending more than you need to on high-ticket items? Make some financial goals and a guideline that you will follow for the next year. Remember to include your personal savings goals, as well.
ALLOWING FOR EMERGENCY All too often, we are sidelined by medical emergencies or unexpected bills. Be certain not to make your budget so tight, as it cannot make allotments for unexpected emergencies or expenses. Give yourself some leeway for the unexpected.
THE BUDGET Now that you've gone through all the steps of seeing how your money is spent, created your budget and have made a plan, it's time to relax. Leave your budget notebook out and be sure to monitor it weekly. If you're using a computer program to track your budget, fire it up weekly and log expenses accordingly. The key is never to fall behind. You should know where every dollar is going and how much you're spending in all areas of your life.
SUGGESTIONS Sometimes, no matter how much we make, it still isn't enough. If you find that your bills exceed your income, there are still some corners you can cut to reach your financial goals. Here are some simple suggestions:
1. Don't buy anything on impulse. Use the thirty-day rule. If there's something you want, write it down. Come back to it in thirty days. If you still want it, then it's a need and not just a fleeting want.
2. Charge items only for inconvenience. If the money isn't there, don't charge it.
3. Pay off credit cards each month. Don't get sucked into high interest rates. Pay off credit cards (or as much as you can) each month to avoid finance charges.
4. Try taking a lunch or snacks to work, instead of eating out.
5. Buy in bulk. Go to large warehouse grocery stores and purchase your items in bulk for added savings. Use coupons and cash back deals.
6. Pay your bills on time. Avoid finance charges by paying your bills when they're due. You'll hold on to your good credit rating and avoid unnecessary charges.
HAVE FUN Don't assume that just because you're on a budget, you are no longer allowed to have fun. Budget your fun in or set aside a certain amount of money each month to do something you enjoy. The less painful your budget is, the more likely you are to succeed.