FINANCIAL PLANNING AND BUDGETING
How Will A Budget Help Me Meet My Financial Goals?
Where Does It All Go?If you've never done a budget but have gone along blithely spending your money each month, you might want to spend a few weeks just keeping track of where your money goes. Write down every penny you spend, no matter how small. Similar to the diet plans that tell you to write down everything you eat, this tool will let you know where you are spending your money. You may be surprised at how often you eat at the local fast food restaurant or buy a candy bar or bag of chips when you stop for gas. It will have a bigger impact when you see it on paper.
If you already have a pretty good idea of where your money goes, you can skip this step.
- Step #1: List all of your income. This includes things like trust fund payments, child support, dividend income, etc. Just make sure that every penny that comes into your household is accounted for.
- Step #2: List how much is going out of your household every month in the form of bills and other obligations. Some of your expenditures are going to be fixed: ie the same each month. These include but are not limited to: mortgage or rent, car payments, utility-type bills that may be fixed, such as cable, internet, phone, other utitilities if you're on a budget plan with the company, dues to health clubs or other organizations, etc. There are also flexible expenditures, such as gas or electric (if you're not on a special plan with your utility company), credit card debts, etc.
- Step #3: Other expenditures that are not considered "bills," such as groceries, commuting expenses (gas, insurance, licensing etc), clothing, entertainment (can include movies or eating out, etc.); any other expenditure that normally occurs in your household.
- Step #4: Savings. This should really be put at the top of the list. Included in your budget should be a plan for savings, even if it's only $5 or $10 a month. The good old savings accounts of our youth aren't worth much anymore, but you can still save until you get enough to invest in a CD or other program.
Online Budget Helps and SoftwareYou can find many web sites to help you set up a budget. There are also many software titles that print forms and help you keep track of your money. If you use either Quicken or QuickBooks, both incorporate budget planning help and forms. Foxway.com offers free budget plans, worksheets, money-saving tips, coupons, a budget calculator, free email course and newsletters. MSNMoney's web site also offers budget helps and tips, along with other tools for your financial planning. And if you're a Windows XP, 2003 Server, or Vista user, Microsoft offers "Office Accounting Express 2007" for free.
Other Budgeting TipsHere's a little more budgeting advice that isn't covered in the paragraphs above.
Don't give up on your budget. Give it several months, don't expect miracles to happen in just a few weeks or a month. If you've never lived with a budget before, it's a whole new experience that will take some getting used to.
Make sure all your income is put on paper before you actually spend it.
Put more in your groceries budget item than you think you might need. Most people undercut this item, then find out they need more. This is especially important if you have decided to cut back on the fast food and eating out.
If you are married, both you and your spouse must agree to plan and live within your budget. Work on it together, don't make it a one-sided affair. If you both agree to it, your budget will have a better chance of success.
Don't be afraid to tweak your budget. If something isn't working, change it. After a few months you should be able to tell if you've overbudgeted or underbudgeted for some items. If you've budgeted $100 a month for clothes and are consistently spending about $75, consider dropping the amount down and put the extra into savings, if it's not needed elsewhere.
Parting WordsBudgeting isn't difficult, if you are committed to it. Many people find they actually have more money to spend where they want to spend it by living on a budget. Instead of spending money without thought, your spending is now directed to what you need rather than meaningless purchases. Give budgeting a try, you should see some good results come from it.