The best place to start with your budget is to assess where you currently are.
One of the biggest pitfalls in working with a budget is being overwhelmed with all of the information.
One of the primary keys to continued budgeting success is accounting for your expenses.
The last, but not least, important point is to forgive yourself. Everyone goes over budget from time to time.
A Beginner's Guide to Budgeting Success
One of the primary keys to financial success is budgeting. A budget acts like a roadmap to your financial future. Without a good one, it may be very difficult for you to reach your desired destination. Get the Facts
The best place to start with your budget is to assess where you currently are. If you have been saving your receipts or recording them using software such as Quicken, you are off to a good start. If not, don't worry. Just be diligent in recording all of your expenses for the next 90 days to give you a rough estimate of your spending habits.
Next, separate your expenses by category and calculate a monthly average for each. Add them up and compare the total to your average monthly income. Do you have a lot of breathing room or are you just scraping by? Chances are that even if you end up with a positive balance at the end of the month, you will find that some areas need to be trimmed down a bit. Start Small
One of the biggest pitfalls in working with a budget is being overwhelmed with all of the information. Budgeting is about making your money work for you, so you want this to be an enjoyable process (or at least not a highly stressful one!). Therefore, it is important to start by focusing on just a couple of key "problem" areas and fine-tuning your results from there.
Review your monthly expenses and see if any areas seem out of sync with the others. Is your dining expense twice that of your grocery bill? Could you take a mini-vacation for the cost of your telephone bill? These are the types of observations that will help you hone in on areas that need attention. Also, keep in mind that your largest expense may not always be the best place to focus your efforts. For example, your mortgage is probably your largest monthly expense, but if you've got a competitive interest rate, there may not be much room to maneuver at this time. However, if you are spending close to that much in discretionary expenses such as entertainment, then you have a good idea of where to start. In budgeting, proportion is key.
One of the primary keys to continued budgeting success is accounting for your expenses. If you don't keep track, you may get off course and not realize it until it's too late. This is especially true for discretionary spending.
For example, my family's "problem area" is dining out. Going out to dinner is a big treat for us because we have busy work schedules and enjoy the opportunity to take a break without thinking about the chores that we need to do at home. Since this is an area that we need to keep a close eye on, we make sure our dining expenses are tracked on a daily basis.
We set a weekly budget and everyday we jot notes about what we've spent. In order to be sure that we don't forget, we keep the "worksheet" in a very visible location, on the kitchen counter. At the end of the week, I tally it up in Quicken. Receipts can pile up, but being forced to "fess up" on a daily basis keeps us truer to our goals.
Being creative in how you account for your discretionary expenses can be very helpful in keeping them under control. Try this or a different method for keeping the spotlight on your "problem areas."
The last, but not least, important point is to forgive yourself. Everyone goes over budget from time to time. Budgeting is not an exact science and there is room for error. However, if you find you are continuing to do so on a regular basis, it is time to reassess your goals and to take a look at the accuracy of your estimates.
Finally, be certain that you have set aside some money in your budget for fun and entertainment. Budgets are crafted based on where you want to end up in the future, but they also need to provide for enjoyment of the here and now!
Take the Next Step:
Begin recording all of your expenses for the next 90 days for a rough estimate of your spending habits. It's important to know where your money is going.
Select a budgeting tool to help you track your expenses:
The envelope system is the oldest and simplest method. Spendtracker is a simple electronic tally that you can carry with you. (Use coupon code STRETCH5 for a $5.00 discount) BudgetMap is a system that fits in your checkbook. Quickenoffers a PC version and an online version. If you are an iPhone or iTouch user, there are applilcations available at iTunes.com.
Guest Post by Jason Holmes
How did I manage to pay off my debts?
Many of us have faced debt related problems in life and have wanted to come out of the situation desperately. I was in such a situation once and am still paying off my credit card debts. I kept on spending money without realizing the impact that it is going to have on my finances. This led to the piling up of a lot of debt that I had to pay off.
I want to share what I did for paying off my debts, so that you may draw something out of my experiences and put it to use in your life, if you are going through such a situation too.
1. Budget formulation: With the help of counselors from the consumer credit counseling agency, I formulated a budget. This provided me with a clear idea of what my income was and where was I spending it. The budget helped me realize that I was earning enough to live a decent life but it was not enough to indulge in luxuries or to help me in "http://www.debtconsolidationcare.com/"paying off debt that I presently had.
2. Cutting down expenses: I had to adjust my spending habits according to the budget I had made. The majority of my income was spent in purchasing clothes, some that I never even wore. I decided on restricting this urge to buy clothes by not going to fancy malls at all. This helped greatly as I managed to save a lot. I would not see any branded clothes and thus would not crave to buy any. This in turn helped me gradually develop the strength to say no to things that I did not really need.
3. Checked on my credit report: I wanted to improve my credit score that had gone down drastically. So I ordered for my credit reports from all the three major bureaus- Experian, Equifax, TransUnion. After getting my reports and going through them, I realized that one of the
debts that were charged to my account was not mine. I disputed this inaccurate information and it was removed from my credit report.
4. Credit card consolidation: As my financial position permitted me to make at least some payments, so I opted for credit card debt consolidation. The total amount of debt after the disputed amount was removed came up to $78,000. The minimum payments that I was making towards my bill were as follows.
Minimum payment on the first card with debt $12,000, at 5% was $600
Minimum payment on the second card with debt $10,000 at 15% was $1500
Minimum payment on the third card with debt $18,000 at 6% was $1080
Minimum payment on the fourth card with debt $11,000 at 4% was $440
Minimum payment on the fifth card with debt $12,000 at 11% was $1320
Minimum payment on the sixth card with deb15, 000 at 6% was $900
Thus, my total minimum monthly payment came up to $5840. The debt consolidation company got my interests reduced and after the reduction I had to pay $4500 every month to the company. This amount was then distributed among my creditors by the debt consolidation company. The amount included the fees of the debt consolidation company as well. I did not have to bother about paying multiple creditors and also had to pay much lesser than what I was supposed to pay originally. Another benefit that I got was that my late fees were waived off. Harassing calls from creditors also stopped as all calls that they made were diverted to the consolidation company.
I have managed to pay off a major portion of my debt. However it will take some more time to get out of debt completely. I am happy with my progress and as per my debt consolidation company I will be debt free in about a year if I can manage to stick to the program.
Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like 'Credit Score The Quintessential Therapy for a Happy Pocket', Take Creditors and Collection Agencies to Small Claims Court' and, My Story- From Depression To a Smile'.
The products and text on this website are for informational purposes only and not intended to replace the assessment, advice or treatment of a physician or therapist.
Images found for this site found from the following sources: Google Images, Animation Factory, exception personal image of Susan Young