Creating A Budget
Your First Step to Financial Freedom
Mention the word budget when you are with a group and you will hear a collective groan. What is a budget? A budget is really a spending plan. It's a way of keeping track of the money you earn and planning how you will spend your hard earned money. A budget helps you spend wisely so you will have money to save. Creating a budget is the first and most basic step you can take toward putting your money to work for you, regardless of your income. A budget is a good thing because it keeps you out of trouble.
When you spend without a budget, you're not in control of your money. The most important ingredient in a successful budget is a positive attitude. Don't think of budgeting as penny pinching and doing without. Think of budgeting as a plan for spending and saving and keep it simple. Creating a budget need not be complicated nor time-consuming.
By age 25, Americans average $6,000 in debt. To avoid the traps that so many people fall into: too much debt, too little savings and too much spending - you've got to have a budget!
Budgeting and tracking your expenses shows you where your money goes. This allows you to make a conscious decision about how to spend or invest your money. You'll know what you can or can't afford. A budget and spending plan involves more than just tracking expenses. Otherwise, all you’re doing is documenting how you run short every month. A budget and spending plan directs your money before you spend it, so you don’t run out of money before you run out of month.
Think of the last time you went to Wal-Mart or the grocery store. Can you remember everything you bought or how much you spent? It's easy to forget and this will eat up a lot of your income if you are not careful.
It will take some time and effort to set up a good budget that's comfortable for you to use, but it is well worth it to get a clear picture of your financial situation.
To Create a Budget:
1. Print the Budget worksheet.
2.
Determine your total monthly income by adding up your monthly take home pay and any other income, such as alimony.
3. Decide what percent of your monthly income you want to save each month. It's recommended that you save at least 10 percent. More if you can.
4. List all of your expenses such as rent or mortgage, car payment, groceries, entertainment, books, etc.
5. Subtract your expenses from your total monthly income. Your expenses should not exceed your income.
Stay Motivated
Your budget won't work unless you stick with it. One of the keys to staying motivated is keeping the budget simple and not to complex or time consuming. One of the most rewarding things about budgeting is seeing results every month. Remind yourself of the importance of your real goals. The budget is just a tool that increases your awareness of where your money goes and provides guidelines for spending so your money goes toward the things that are important to you.
