You can prepare a household budget - and you don’t have to be a financial wizard to do it. Simply put, you can’t spend more than you have! You have to prepare a budget and fit your "living" within your "means."
Read on for six budget preparation tips that will help you toward financial success.
Preparing a Budget - Step 1
~The first step is to realize where your money goes. How are you spending it? This requires a little record keeping but it's not difficult. Simply write down every purchase you make that is not a monthly bill, for at least a week. When finished sort these into appropriate categories to plug into your budget later. For example; dining out, lunch at work, groceries, coffee, gasoline, snacks, etc.
Preparing a Budget - Step 2
~Second lets prepare a budget to tackle that debt. The monkey on your back will always insist on being fed until you take control! Make a commitment to stop using plastic. Take control by knowing what you owe, what you’re paying, and how much it's costing you. Make a list. Include Creditors Name, Amount Owed, Interest Rate, Current Minimum Monthly Payment.
Now, add up all of your current minimum monthly payments. You will pay this amount each month until your debt is paid in full. When an account is paid, take that money and budget it for another monthly payment. This is the secret to paying them off before you die! And, still have time to enjoy a lifestyle within your budget.
Preparing a Budget - Step 3
~Next, write down regular monthly expenses. Things like the mortgage, cable, phone, electric, car payment. Some of these expenses may not be the same each month (like the electric bill). You should figure an average monthly amount for these. If your provider offers a budget plan where your payment can be a consistent amount each month, this makes budgeting these bills much easier. So do it!
Preparing a Budget - Step 4
~Now figure in the variable expenses. These are things like car maintenance, home maintenance, property taxes, income taxes, pet care (vet bills, and medicines), your family’s medical expenses (physician co-pays, deductibles, prescriptions (or prescription co-pays). Go through your financial records and write down every expense you can find that did not occur on a regular monthly basis. When you’re done, add the total amounts for the year, divide by twelve, and this will give you an estimate of what you should be setting aside each month to budget these expenses. This is a variable expense monthly allowance to be included in your budget as a monthly expense.
Preparing a Budget - Step 5
~This is one of the most important steps in the budgeting process. The one step that most of us forget to do. The biggest budget busters are these "unexpected expenses". They’re not really unexpected. Most of us just have a tendency to treat them as if they are unexpected. You don’t budget for them. Consequently you will not be financially prepared when they arise. You know that the car and home require some level of maintenance, but do you actually have a plan to pay for that expense? Or, when the hot water heater goes, will you be forced to resort to the use of plastic. This is what they hope you will do. Of course the property taxes have to be paid. Will you have the payment when it is due?
To maintain a successful budget you have to plan for these "variables". If not, you will inevitably use the plastic to bail yourself out. The variable expense allowance in your monthly budget will allow you save for these expenses. This is an essential step in preparing a budget, building financial security and investing in yourself.
Preparing a Budget - Step 6
~ Set a reasonable amount in your budget for a monthly savings allowance. This will be an emergency fund that can bail you out in case of tragic circumstances such as a serious illness or unemployment. Start with 10-15 % of your income and cut back to as little as 5% if you need to balance the budget. But, do save something! If you have to start small, as your finances improve, you should increase your savings allowance to reach at least 10% of your income.
Of course, once you have all of these figures in place you may find that you don’t have enough money to cover all the expenses. This is when you have to start eliminating unnecessary spending, trimming down expenses by using some money saving strategies, budgeting or possibly considering an extra income.
It isn’t always an easy process. It depends on how much of your spending is "unnecessary", how much you’re paying out, and how much you want to budget and be financially independent.
One thing is certain, if you take control of your money, and are committed to preparing a budget, you will find success. If you don't prepare a budget, things will not change, and will inevitably get worse. You will continue spending money that you don’t actually have.
So create a budget with a good spending plan that cuts out unnecessary spending, reduces monthly bills and expenses to the bare minimum, and the use of plastic. Save money in every area of your budget. Remember, $10 a month doesn’t sound like a lot. But, a savings of $10 per month is $120 per year that you can apply somewhere else in the budget.
Every dollar you free up helps bring the budget into balance - helps you live within your means. Don’t spend more than you have. Prepare a budget. It doesn’t get any more elementary than that!
