Creating A Budget To Control Personal Finance
If you have never made a budget before, the idea may seem simple
. All you have to do is make income and spending balance, right? Wrong! Make your personal finance plan work by learning how to make a budget you can live with.
A spending diary can be a great tool to help you see how you spend your money. Use it for at least one month, as this will let you see your spending patterns over a period of time. With a month pattern you will be able to see when your rent or mortgage comes out, when you pay your car loan and your car insurance, how much you spend at the liquor store and for coffee and drive through food. This is an important exercise in personal honesty and accountability. Stick to it.
Now, take a look at how much money is coming in on a monthly basis. Go by the net amount rather than the gross amount, as there can be a great deal of variance depending on where you live and the taxation rate. Hopefully, your income far exceeds how much you spend. If not, here are some tips to help you get on track to balancing your budget and saving.
If your income falls below your spending habits, you may start to experience financial difficulties. Some choose to consolidate their debts in order to reduce their interest payments. However, the best solution to preventing financial woes is simply to change your spending habits.
With your current income, you need to cover the basics. The first thing to take care of is a place for you to live. Whether you rent or own, pay for your mortgage or rent first. Also take care of property taxes, insurance, as well as electricity, telephone and heating costs before you tackle your next issue.
Next comes transportation. Only you know whether you truly need the car that you have now and whether you can afford to keep it. The combination of car payments and car insurance may be steep depending on where you live. The cost of fuel can be very high. As can the cost of car maintenance. Anticipate how much it will cost you to properly maintain your car for the period of a year. Will it be more cost and time effective for you to carpool? To use public transportation? To work from home twice a week? Do you need a 4X4 for in-city driving for your work? Seriously consider what works best for you and what you can get by with.
The food you eat needs to fuel your body and your mind. It does not need to burn a hole in your pants pocket. By taking a bag lunch to work, and carrying your own coffee with you in the morning, you can save more than two hundred dollars a month if you regularly eat lunch out and buy one coffee a day. That can add up very quickly.
Clothing is important, but do you really need the latest styles to carry off your job? Probably not, unless you are a fashion editor or movie star. You can find lots of gorgeous clothing at second hand stores. Other things you may be spending your money on are entertainment such as movies and dining out. Simply by renting movies and making special meals at home, you can save a lot of money and learn some new cooking skills.
It is important to learn how to live with the budget that we make. By doing so, we can end up taking ourselves out of the spiral of debt that plagues us. And we can save for a rainy day and a brighter future.
by: Bradley Jenkins-Cooper.
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