Learning to Budget
If you have never made a budget, it may seem like a daunting task. Budgeting isn’t simple. It requires your time, a serious commitment, and a willingness to honestly assess your total financial picture. To gain control over your finances, you have to know where your money is going every month- right down to the smallest purchases and expenditures. For many people, this can be an eye-opening experience. But once you have a clear grasp of your financial situation and a forthright appraisal of your spending habits, you can begin to make positive changes.
Here are three important keys to creating a successful budget that really works:
- Make it realistic. You may wish you only spent $300 a month on groceries, but if the actual number is twice that amount, be truthful. You have to be honest with yourself.
- Learn to better manage your money. There are simple, everyday things you can do to save money. Find out how to get better credit and make your money work for you.
- Adjust your budget, when necessary. Remember that your budget isn’t written in stone. Review it regularly and see how it is working. Financial situations are fluid. Is your situation improving? Are you controlling your spending? A budget will only work if you can stick to it and see actual progress.
Starting a budget
When you are just starting to create your budget, write down your financial expectations and goals for the future. These can range from “ I want to be financially secure” to “I want to buy a home in the near future”. Different people will have very different goals. Next, figure out your monthly income from all sources. This is your net pay- what you actually take home in the way of income. Now, you need to determine your month expenses. Take an entire month and track all of your expenditures. This means keeping receipts and writing down every cent you spend.
Fixed expenses are relatively easy to calculate. They would include your rent or mortgage, any auto loan payments, and any other type of fixed loan payment. Other monthly bills can vary from month to month- food, gasoline, utilities, telephone, credit card bills, cable, insurance etc. Remember to include entertainment expenditures, also. These could be restaurant expenses, movie tickets, sporting events, and the like.
Preparing a budget
Now you are ready to plan a realistic budget. The simplest way to do this is to write down all of your monthly expenses, leaving nothing out, and then balance it against your total monthly income. This is the easiest way to become aware of how much money you have, how much you are spending, and if there is any surplus. Many times there is no extra cash once you’ve balanced your income and expenses. There are also instances when the amount of money going out is greater than the amount of money coming in.
Dealing with financial matters can be a stressful and even frightening experience for many people. But ignoring the situation or just hoping for the best will not give you financial security or peace of mind. No matter what your circumstances are, the only way to successfully deal with them is head-on.
Keys to budgeting
Successful budgeting requires you to keep precise, accurate records of what you take in each month as income and what you spend. The easiest way to do this is to keep your receipts. This not only tells you how much you spent, but also what you spent the money on. Whatever system works for you is what you should use. Save your receipts, keep a journal. It’s your choice.Your Bank Statement
If you have a checking account, your bank will either send you monthly paper statements in the mail or you can access your account information through its online banking website. The important thing is to check your account statement carefully for any inaccuracies or unusual activity. This statement will also list all the transactions you have made over the past month, including checks, debit card purchases, or any automatic withdrawals you have set up.Paying by Card
Any time you use your debit card or credit card, or make an ATM withdrawal, you should keep the receipt for your records. Keep track of your account balance so that you can avoid overdraft and bounced check fees.Compare Your Monthly Expenses
At the end of the month, go over your receipts and add them up. Compare what you actually spent to what you budgeted. See if there are ways to cut your expenses.
It may take a few months to get used to living on a budget. Don’t be hard on yourself. If you accidently throw away a receipt, just estimate what you think the amount was and write it down. If your original budget isn’t working for you, then make the necessary adjustments so that you can stick to it. If you are an impulsive shopper, avoid going to the mall or anyplace else that presents temptation. Instead of going to the cinema, rent a movie and make popcorn at home. All the positive changes you make, however small, can have a big impact on your financial situation.
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