How to Make a Budget You'll Use Consistently
By Tisha Kulak Tolar
While the news world is all a flutter with the reasons why you need to have a budget in order to manage your money, many information sources fail to mention the most important part - not only do you need to create a budget, it needs to be reasonable enough to use well into the future and you also need to use it. All too often, people set out with the best intentions to take control of their money. Unfortunately, those intentions are not good enough and people do not stuck with it long enough to integrate it into their daily or weekly money management.
So how do you start a budget? The steps are fairly simple and the outline that follows will highlight some of the considerations to take note on. One of the most important things to remember is that no one system will work for every individual. It may take some experimenting to get it right but keep working on it.
Steps for Starting a Budget
Track All Your Expenses
You need to figure out where your money is going each day to truly get a handle on your cash flow. For at least one month, carry a small notebook with you and write down every single cent you spend, whether it be your entire grocery receipt total or the bottle of water you bought on the way home from work. Track all ATM withdrawals and credit card purchases. It all adds us and by knowing exactly where your monthly spending is going, you'll know how to build a better budget.
List All of Your Expenses
Once you have a handle on what is going out randomly, you'll need to gather every one of your bills and make a list of what you owe to whom and when the bill is due. You should also note the current balance due on each account just so you know where you stand and how much farther you have to go.
Categorize It All
You'll now need to combine both lists into one and categorize them in different ways. Start by labeling each expense by type such as groceries, entertainment/dining out, car, utilities, etc. There may be a few random items that can be considered miscellaneous. On a new piece of paper, rewrite the list according to the categories and total for the month.
Discover Your Income
Surprisingly, there are some people who have no idea how much money they really bring home each week. This step will help you tally all of the income you receive regularly including your salary, commission, bonuses, child support, public assistance, etc. making sure you have counted everything, then total it all up for one month.
Do The Math
Next, take your income and subtract your expenses for the month. Are your left with a negative number or a positive one? If you have a positive number, great! You have a bit of room to be flexible but the budget will help you see where you can save some money and help you understand how to invest your left over cash better for a more secure financial future. If the number is negative, you either need to cut your spending or make more money. Whatever the number is, move to the next step.
Start Budgeting
One a third sheet of paper start listing your financial obligations, starting with the expenses you have at the first of the month and in an order of priority. For instance, if your mortgage payment is due on the first of the month, list it first, followed by all other important expenses by category - meaning you won't put your $500 total for entertainment before your car note. When you have your basic outline of expenses covered but they exceed your income, move to the next step.
Start Making Cuts
Your next step will be to review all of your categories and see where you are spending too much money than start making cuts. If your category for entertainment a month costs $500 total, start slashing items from your original expense tracking list you started with. Look for excessive costs such as dining out too often, buying convenience foods, or other spending that isn't necessary for basic survival. Keep cutting until your income exceeds your expenses. Your goal is to spend less than you earn.
Remain Flexible
There will always be expenses that are unexpected that will pop up from time to time. By following a budget consistently, you should know how to make it work each month. As your income increases over time, make allowances to add more to your savings accounts and retirement funds. You want to and should know where all of your cash is going at all times. A budget will help you do this.
Tisha Kulak Tolar is a writer for LeaveDebtBehind.com where she regularly writes about debt consolidation, getting out of debt, debt settlement and saving money.
==========================================
Why Budgeting is the Best Thing You Can Do For Your Finances
By Tisha Kulak Tolar
During the recent financial crisis that hit individuals hard all across the nation, there were consistent tips coming in from money experts across the country in the newspapers, magazines, and on the internet. Their resounding theme was the same - in order to regain control of your money - you've got to budget your money.
There are many reasons, some you may not have thought of before, to budget your money all of the time. Here we will highlight some of the most important reasons:
Taking Back Your Finances
One of the reasons you want to start a budget now is to regain control of your cash. If you do not know where your hard-earned money is going, you certainly will not have control of your financial situation.
Controls Your Spending
People who do not live on a budget are likely overspending way more money than they can afford each years. This leads to many problems including late or over the limit fees on credit cards, buying a house or vehicle that is too expensive - all of which lead to serious debt problems.
Starting to Save
If you have ever said there is no money left over to save, having a budget can show you where to find that extra money you claim does not exist. By knocking out your overspending, you can turn that cash into a secure future.
Covering Emergencies
A lot of people swear by an emergency fund of a few thousand dollars as a safety net should some disaster strike, such as your roof falls down, you get sick, or you lose your job. In addition to a savings plan, a budget will also allow you to start stashing cash in a special fund just for emergencies.
Rebuilding Your Credit
When you consistently pay your monthly financial obligations late (or not at all), your credit score and history will take a big hit and the negative information will not be a help to your financial situation. By keeping on track with a budget, you will now when your bills are due and you will know you always have the money to pay the bills when they are due, reducing late and missed payments, which will boost your credit.
Avoiding Bankruptcy
The financial kiss of death, bankruptcy can black mark your finances for years to come. Bankruptcy is not only a credit disaster; it can also be a costly expense you likely can not afford. By paying your bills on time and cutting out unnecessary spending, you will likely not have to worry about filing for bankruptcy to get out of money troubles.
Opportunities Knock Once
There are many times that a great opportunity will come your way and you have to miss out because you do not have cash at the ready. Whether it be a great real estate deal, an entrepreneur opportunity, or even a great price on a family vacation, having a budget can mean the difference between taking advantage and losing out on a once-in-a-lifetime opportunity.
Tisha Kulak Tolar is a writer for LeaveDebtBehind.com where she regularly writes about debt consolidation, getting out of debt, debt settlement and saving money.
By Tisha Kulak Tolar
While the news world is all a flutter with the reasons why you need to have a budget in order to manage your money, many information sources fail to mention the most important part - not only do you need to create a budget, it needs to be reasonable enough to use well into the future and you also need to use it. All too often, people set out with the best intentions to take control of their money. Unfortunately, those intentions are not good enough and people do not stuck with it long enough to integrate it into their daily or weekly money management.
So how do you start a budget? The steps are fairly simple and the outline that follows will highlight some of the considerations to take note on. One of the most important things to remember is that no one system will work for every individual. It may take some experimenting to get it right but keep working on it.
Steps for Starting a Budget
Track All Your Expenses
You need to figure out where your money is going each day to truly get a handle on your cash flow. For at least one month, carry a small notebook with you and write down every single cent you spend, whether it be your entire grocery receipt total or the bottle of water you bought on the way home from work. Track all ATM withdrawals and credit card purchases. It all adds us and by knowing exactly where your monthly spending is going, you'll know how to build a better budget.
List All of Your Expenses
Once you have a handle on what is going out randomly, you'll need to gather every one of your bills and make a list of what you owe to whom and when the bill is due. You should also note the current balance due on each account just so you know where you stand and how much farther you have to go.
Categorize It All
You'll now need to combine both lists into one and categorize them in different ways. Start by labeling each expense by type such as groceries, entertainment/dining out, car, utilities, etc. There may be a few random items that can be considered miscellaneous. On a new piece of paper, rewrite the list according to the categories and total for the month.
Discover Your Income
Surprisingly, there are some people who have no idea how much money they really bring home each week. This step will help you tally all of the income you receive regularly including your salary, commission, bonuses, child support, public assistance, etc. making sure you have counted everything, then total it all up for one month.
Do The Math
Next, take your income and subtract your expenses for the month. Are your left with a negative number or a positive one? If you have a positive number, great! You have a bit of room to be flexible but the budget will help you see where you can save some money and help you understand how to invest your left over cash better for a more secure financial future. If the number is negative, you either need to cut your spending or make more money. Whatever the number is, move to the next step.
Start Budgeting
One a third sheet of paper start listing your financial obligations, starting with the expenses you have at the first of the month and in an order of priority. For instance, if your mortgage payment is due on the first of the month, list it first, followed by all other important expenses by category - meaning you won't put your $500 total for entertainment before your car note. When you have your basic outline of expenses covered but they exceed your income, move to the next step.
Start Making Cuts
Your next step will be to review all of your categories and see where you are spending too much money than start making cuts. If your category for entertainment a month costs $500 total, start slashing items from your original expense tracking list you started with. Look for excessive costs such as dining out too often, buying convenience foods, or other spending that isn't necessary for basic survival. Keep cutting until your income exceeds your expenses. Your goal is to spend less than you earn.
Remain Flexible
There will always be expenses that are unexpected that will pop up from time to time. By following a budget consistently, you should know how to make it work each month. As your income increases over time, make allowances to add more to your savings accounts and retirement funds. You want to and should know where all of your cash is going at all times. A budget will help you do this.
Tisha Kulak Tolar is a writer for LeaveDebtBehind.com where she regularly writes about debt consolidation, getting out of debt, debt settlement and saving money.
==========================================
Why Budgeting is the Best Thing You Can Do For Your Finances
By Tisha Kulak Tolar
During the recent financial crisis that hit individuals hard all across the nation, there were consistent tips coming in from money experts across the country in the newspapers, magazines, and on the internet. Their resounding theme was the same - in order to regain control of your money - you've got to budget your money.
There are many reasons, some you may not have thought of before, to budget your money all of the time. Here we will highlight some of the most important reasons:
Taking Back Your Finances
One of the reasons you want to start a budget now is to regain control of your cash. If you do not know where your hard-earned money is going, you certainly will not have control of your financial situation.
Controls Your Spending
People who do not live on a budget are likely overspending way more money than they can afford each years. This leads to many problems including late or over the limit fees on credit cards, buying a house or vehicle that is too expensive - all of which lead to serious debt problems.
Starting to Save
If you have ever said there is no money left over to save, having a budget can show you where to find that extra money you claim does not exist. By knocking out your overspending, you can turn that cash into a secure future.
Covering Emergencies
A lot of people swear by an emergency fund of a few thousand dollars as a safety net should some disaster strike, such as your roof falls down, you get sick, or you lose your job. In addition to a savings plan, a budget will also allow you to start stashing cash in a special fund just for emergencies.
Rebuilding Your Credit
When you consistently pay your monthly financial obligations late (or not at all), your credit score and history will take a big hit and the negative information will not be a help to your financial situation. By keeping on track with a budget, you will now when your bills are due and you will know you always have the money to pay the bills when they are due, reducing late and missed payments, which will boost your credit.
Avoiding Bankruptcy
The financial kiss of death, bankruptcy can black mark your finances for years to come. Bankruptcy is not only a credit disaster; it can also be a costly expense you likely can not afford. By paying your bills on time and cutting out unnecessary spending, you will likely not have to worry about filing for bankruptcy to get out of money troubles.
Opportunities Knock Once
There are many times that a great opportunity will come your way and you have to miss out because you do not have cash at the ready. Whether it be a great real estate deal, an entrepreneur opportunity, or even a great price on a family vacation, having a budget can mean the difference between taking advantage and losing out on a once-in-a-lifetime opportunity.
Tisha Kulak Tolar is a writer for LeaveDebtBehind.com where she regularly writes about debt consolidation, getting out of debt, debt settlement and saving money.
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