Hints for a Budget
Starting a budget requires a realistic look at your household's financial situation. Guesswork doesn't work; knowing exactly what comes in and what goes out, monetarily, is the required to create a successful budget. The key to maintaining it is staying alert to your finances on a weekly basis and making spending decisions based on it.
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Know What You Really Spend
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Carry a small notebook with you for two to four weeks. Write down every penny spent and what items you purchased. Knowing where your money goes helps in determining the actual expenses. At the end of the month, household members need to sit down together and compile their expenses into one statement. You may be surprised to learn how much is going toward things like coffee house purchases and fast food.
Create Lists
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Assessing your financial situation provides you with the most important tool to create a budget. Make one list for assets, including checking and savings accounts and net household income. Make another list including all liabilities, such as your mortgage, home equity loans, credit card debt, car and student loans, and any money owed to friends and family. Create a third list with non-negotiable expenses like savings, groceries, gas, heat, electric, water and trash, and a fourth list of negotiable expenses including cable television, cell phones and entertainment. The final list should include the amount you spend on gifts for family and friends.
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Balance Assets Versus Liabilities
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Compute your monthly household income and subtract your monthly liabilities, non-negotiable expenses, five percent for an emergency/medical savings fund, and 1/12th of the gift budget. Subtract the negotiable expenses from the amount left. If you end up with a negative number, you need to decide what to eliminate or cut back on from the negotiable expenses or find an additional source of income.
Keep Records
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Once created, your budget needs followed. Keep up-to-date records on a weekly basis tracking income and expenses. This makes everyone accountable for overspending or stepping outside the boundaries defined within the budget. Take a look at where you stand at the end of each month and determine whether any adjustments need to be made. Merely having a budget is just the first step; adhering to it is the "hard part."
Ways to Save
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Cut back on water by taking showers instead of baths, get rid of cell phones or cut back the plan, eat at home instead of at restaurants, and pack your lunch for work. Have movie nights at home, shop at discount stores for household goods and watch sales for other items. Only purchase what you need, not what you want, and pay off as much debt as possible, as quickly as possible, to eliminate the interest from accruing.
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References
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