Tips To Create A Personal Budget
More Tips and Reasons To Create a Personal Budget
budget now, it’s much easier to plan.Suddenly it dawns on you that a large expense item is looming in the very near future. Perhaps a new car to replace that costly old one, or maybe a bigger home because of an expanding family, or college for a member of the family. What are your options? Is borrowing the answer? Not always, and maybe not the best option. If you create a personal
If you already have a budget in place, you know exactly what your current income is, as well as how much will be going out. You now have the option to review your budget and see if there are any discretionary funds that may be available. However, if you’re like many individuals and don’t have a budget plan, you probably don’t have a good handle on your finances.
Your first thought will be to borrow and create more debt, rather than trying to squeeze all that you possibly can from your current income. There’s no question, you would be a lot better off if you had a budget in place to track your spending with a plan to get rid of debt.
It may appear a bit daunting to create a personal budget, and living within a budget can be even more difficult.
However, you’ve got to bite the bullet, create a workable budget, and do your best to stick with it. It’s not difficult to see how careful budget planning can make a huge improvement in your financial situation.
Plus, if you have fewer financial problems, then you will have less stress in your marriage. You’ll also discover that if both spouses work together on a budget, and share input, the marriage benefits substantially.
One of the primary causes of divorce is money arguments, and the stress associated from financial problems. If you create a personal budget, that is well planned and exercise careful management to follow it, you’ll find that this will go a long way to a happier marriage.
It’s not always easy, however, to arrive at that point quickly, and it sometimes may appear to be overwhelming. We will be offering you some tips to stay on a budget without losing your mind. Additionally, we will find ways for you to put away money as you prepare for some major purchase while you’re on a tight budget.
At this point in time, we’ll assume that your budget is already setup and you know what funds are available. You still may require some assistance, however, to know how to stay on your budget.
The first tip is to:
Carefully review your budget and find out how much you can put aside for savings each month, and have that amount direct deposited to your savings account or to a mutual fund account if you have one. Make sure that you make this transfer each and every month. You’ll soon discover that this savings deposit will make a significant difference later.
Draw out enough cash from your account that will last for a one week period. You need to be aware that this cash that you have in your hand is absolutely all that you have or will have for any discretionary or non-budget expenses for that week. This will help when the temptation to buy that pair of shoes you see. When a purchase such as this takes most of the cash, you’re less likely to cave in. Before this, you would have pulled out a credit card and bought them. No more credit card use either!
Another expensive bad habit is purchasing alcohol or tobacco products. If at all possible, stop using these items and apply that amount toward other variable expenses or credit card debt. This will benefit you in two ways, better health and a reduction of debt. Another possible benefit is saving on health care expenses, and you may also qualify for a reduction in insurance premiums as a non-smoker.
Be certain that you’re not the only spouse that is concerned enough to create a personal budget. If one spouse is trying to save money and the other continues to spend and create credit card debt, you’re fighting a losing battle.
You need to discuss with your spouse exactly how much is needed by each for this spending money. Don’t make this a one time meeting, but at least once a week, check with the other spouse to see how well the program is working. Both spouses must share the responsibility for a workable budget. If each of you is able to cut back just a little, it can make a big difference over time. One spouse should not shoulder this burden alone. It will not work!
If you’re burdened with credit card debt, then you know how frustrating it can be when it appears that it will take several lifetimes to pay it off. The best solution is to find the card with the highest interest rate, and put the extra funds against this card each month until it is paid off. Continue to pay the minimum balance required on any other cards that you may have.
After the first card is paid off, find the next card with the highest rate, and apply all extra money on it like the first card. Continue to do that until all cards are paid off.
When you first create a personal budget, you probably monitored your expenses for a few weeks, but after it was all setup, the temptation to ignore those small expenses may have taken place. Make it a priority to review all of the expenses, as you should, and it will help you to stick with your budget.
Always save your receipts and keep track of the places where the money was spent. This will help you to avoid overspending, especially when you realize just how much money has gone through your hands.
Another important point is your checkbook. Do you take the time to balance it every month? If not, you should. Believe me, banks make errors too, and some can cost you dearly if you don’t reconcile the account. I’ve seen cases where the bank made an error that led to the account being overdrawn, and after the bounced check fees mounted up, hundreds of dollars in fees were paid. Add to that the embarrassment and possible reflection on your credit rating caused when a check bounces, and you have a serious situation. Never assume that because they’re a bank, they’re always correct. They are NOT.
Periodically, you and your spouse need to review the budget and see if there are any expenses that can be cut. Certain items, such as buying your lunch at work can get very costly, as do the commuting and parking expenses. Brown bagging for a few days a week can save quite a bit and car pooling will as well. These savings can be applied to the credit cards or help with other necessary expenses.
If you find that you’re tempted to take money from savings for some expenses, then put that balance in a CD where you won’t be able to make withdrawals without a penalty. Plus, the CD interest rate may be a little higher as well.
When you create a personal budget, you should allow a few dollars for variable type expenses. Preparing your budget for the first time will take more effort, but once you understand it, and work with it for a while, it will become much easier. In the long run, you will benefit when you see your debt being reduced, plus an emergency fund setup to cover those unexpected surprises.
Gust Lenglet is the CEO of HBS Financial Group, Ltd., an accounting & tax preparation firm in Maryland. He has more than 25 years of experience in the banking and financial industry. Gust started his career as a loan officer at a major national bank, and then moved on to become controller of a major law firm. In recent years, he has written many financial articles that have been published on Ezine Articles and many websites.