Chapter 3: Budgeting
Few people want to struggle to meet their monthly obligations. So what you do to make bill-paying easier in the future? Regardless of whether you are a millionaire or making minimum wage, the foundation of financial success is the same – budgeting. Budgeting means analyzing what you have coming in, then developing a reasonable and goal-oriented plan for what goes out. Essentially, a budget is a tool that can help you make the most of your money.
Use the Budget Worksheet to list your income and expenses. If you don’t know exactly to the penny what you are spending on groceries, clothing, or other items, don’t fret. Just put down your best estimate for now. By tracking your expenses for a period of time (you can use the Tracking Worksheets or a computer spreadsheet), you can – and should – create a more accurate budget in the future. Don’t forget to include debt payments and savings. For periodic expenses, such as vacation, determine the annual amount and divide by twelve.
Though no two budgets are alike, there is a common rule: expenses should never exceed income. If you are currently spending more than you are earning, think about ways you can increase your income and/or reduce your expenses. Can you get a part-time job? Cut back on dining out? Skip the daily $4 mocha latte? Get a cheaper cable package or cut your land-line phone? Increasing income can be difficult, but most people have some expenses they can trim. Honestly assess what is a necessity and what isn’t. List the changes in the proposed column of the budget worksheet.
Your budget is only helpful if you follow it. Tracking your expenses on an on-going basis can help you recognize when you should stop spending because you have reached your limit in a particular category. However, if you overspend once in a while, try not to get discouraged. No one is perfect. If it happens often, you may need to adjust your budget so that it is more realistic. For example, perhaps you can’t keep your food costs at $150 a month, but you can cut back on your clothing purchases.