Budget it!
Friday, September 3rd, 2010
I know that a vast majority of you have all been seeking creative ways to stretch your dollar in these trying economic times. You are not alone, welcome to the club J. Each day, we all face the demands that this economy has forced upon us, but thankfully, there are many ways to stem this observable fact.
I hope to share with you some very useful guidelines that have helped many stay afloat, or better, successfully navigate their personal financial affairs on their quest to financial wellness.
So, are you currently earning a regular income? Do you have recurring weekly/monthly expenses – cable, utilities, etc? Do you have a mortgage/pay rent? A car loan? Are you repaying student loans? Do you have a family? If your answer to three or more of these is ‘yes’, then a great approach to start is by creating a “budget” which is a very simple tool that has helped millions to optimally manage their monthly income and expenses.
“Call it your map – your guide to keeping you on track in dispensing each hard earned dollar.”
Certainly, your budget is very personal and priorities will vary depending on each individual. The trick though, is to make it very straightforward and easy to understand, no ambiguous accounting terms and formulas to complicate a simple tool. For this, there are many templates available on the World Wide Web. Or, you can easily create your own by compiling a two lists – One of your expected:
1. total monthly income(s)
2. total monthly expense(s)
Add each list separately, and then subtract the total expenses from the total income. Ideally you should end up with a positive number, or at worst, zero. If your result is a negative number, then you are spending more than you are earning and will need to make some cutbacks. (or seek alternative ways to make additional income!)
Total Income – Total Expenses = Disposable Income
This is where planning a budget beforehand is useful – You get to understand how much ‘disposable’ income (Money that you have left over for miscellaneous expenses, saving or paying off debt perhaps) you have, or don’t, after you’ve covered your monthly/ day to day expenses. No guessing.
It took me 4 of my 8 years of working to actually see the phenomenal benefits of having a budget and how it magically seems to make your dollar stretch. Especially if you have a family, you will begin to see clearly where a budget becomes pivotal in maintaining its financial stability and preventing losses.
Why is it important, hmm? For three of many simple reasons…
- The black and white
Figures become more real when they’re in black and white.
Putting your income against your expenses by writing it down shows you exactly where every penny goes, where you overspent, where you can cut back, and where you can spend some more. - Prioritize and Save
If you’re struggling to meet your monthly expenses, using a written budget can highlight areas where you can save or prioritize expenses. Remember, record everything that requires spending in your budget, it all adds up! - Reduces Stress
Having a budget can reduce stress, since planning helps you to prepare for what are ahead – investment planning, upcoming expenses, etc. It reduces the anxiety you may experience when it’s maintained in your head only.
Budget, budget, budget. Just get started.
Create your budget.
Elle
Excellent tips. “Take an oath of financial honesty”. Stay away from credit cards if you can “Because honesty would mean you don’t buy it if you don’t have the money for it”. Be honest with what you have, budget and use cash when you need to.
[Reply]
Supernova Reply:
September 6th, 2010 at 9:23 am
True. I use a credit card to build credit though. i.e. I only spend what’s in my debit account and then pay it off in full before the due date. Of course, I still need a budget in place to figure out just how much I have available to spend. Works wonders to prevent me going into [more] debt.
[Reply]
Elle Reply:
September 9th, 2010 at 10:52 pm
mhm…excellent strategy in preventing yourself from being in debt Nova. And what’s even more cool about it is the savings you make from not having to pay interest on the ‘borrowed funds’ just because you paid it off in full before the due date.
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