Money, says the proverb, makes money. When you have got a little, it is often easy to get more. The great difficulty is to get that little. Adam Smith
For most of us, making a budget is one of those tasks that we hate to even think about. But it’s really important to map out your income and expenses/purchases. If you want to save money, there are a million ways to do it, but first, you must know what’s coming in and what’s going out. Believe it or not, a realistic budget is your best weapon to prevent overspending and to help you save money. As you start the new year, what better time to get your finances in hand?
What’s Coming In?
Calculate all of your income-salary, bonuses, awards,tips, tax refunds, alimony, child support, dividends, interest, and any other sources.What Are You Spending?
Developing your budget is much simpler if you have records of what you are currently spending. Use your check register, charge account bills and on line banking records to help jog your memory. Rather than saying "I think we spend about $300 a month on groceries," you need the exact average monthly amount you spend for various items. Keep bills from utilities, physicians, service stations and any expense that varies from month to month. Once you have a running total for several months you can develop an average budget and adjust it up or down as needed.
Don't forget little expenses you may pay cash for like Starbucks coffees, stamps, newspapers, magazines and gum. They all add up! You might even want to go back a few years. One expense I almost forgot to budget for this year was tree trimming, because I only have it done every other year or so.
It’s easy to find a budget form on line that you can use or you can make your own. It can be a basic spreadsheet on your computer or you can chart your items the old fashion way with pen and pencil. List the item, amount due monthly, who the money is paid to, and how the money is paid (check, cash or charge).
Example: Mortgage/Rent... $975 ... CitiMortgage ...Check/Money Order
Watch those miscellaneous categories
Make sure you have enough well-defined categories to capture your true spending. Putting too much into a miscellaneous category makes it harder to track what you have spent which make it harder to control, especially the splurges.
Don't Forget to Budget for Special Occasions
When forecasting your expenses, remember to include gift-giving occasions. Mother's Day, Valentine's Day, birthdays, Christmas, and anniversaries are good examples. If you plan to spend money on these occasions, remember to include this in your budget.Keep Track of Your Expenses on a Daily Basis
I call the bank's automated line and do my banking every single night before I go to bed. I can see what checks and/or debits from my debit card are posted and what my running balance is. I compare with what I have in my checkbook or with receipts. This only takes about 10 minutes. Often people get into trouble when they try to keep a running total of what they have left in their head and get into trouble.Cut Back Where You Can
Once you have entered your income and expenses, if you are like many people your expenses will be too high compared to your income. Keep going over each line item to see where you can cut back.
Have you compared insurance rates lately? If not, you might be paying too much. Can you cut out annual magazine subscriptions and just download interesting articles from the Internet to read instead, or borrow books from the library? Can you take a lunch to work instead of eating out? Go over each line item starting with the biggest expenses first, and see where you can cut back.
An effective budget puts YOU in control of your finances, rather than letting the control slip into the hands of chance. Taking a picture of your current financial situation determines where the funds are going now and allows you to begin developing plans for reducing expenditures and increasing savings. Determine which budget items are necessities, which are "luxuries" (and perhaps expendable) and where expenses can be cut or eliminated.
Wants vs Needs
You will save a ton of money if you don't mistake wants for needs. Needs are pretty simple to identify--those items that are necessary to sustain the family: Shelter, food, clothing, transportation. Wants are those things that enhance or possibly improve our family life. A car is a need. A $50,000 Sport Utility Vehicle is a want, even if a lot of people don't see it that way. Have you ever heard (or said) "I absolutely need...?" when the actual meaning was "I really want?" This is not to suggest that you shouldn't be able to have the things you want--only that to delude yourself into believing that a want is a need--and busting your budget in the process--is a recipe for financial disaster.
Start your 2012 Budget as soon as you can. Don't delay. Hope this information helps. Share your comment and let me know how it goes.
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