Here’s a very important financial tool which I’ve noticed to be used quite uncommonly in common American households. A budget.
Though many of us already use budgets either on a daily or monthly basis, the rest of us haven’t ever really sat down and figured out what our spending limits are or how much we could really charge our credit cards at the mall.
Budgeting is not hard. The most challenging part of budgeting is figuring out how you can make all your income pay all your obligations. The actual act of composing the budget is pretty easy:
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Write down your total monthly income – include all sources.
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Write down all the recurring expenses you have each month - utility bills, debt payments, medical insurance, and anything else that remains relatively consistent.
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Write down your approximate monthly expenses - gas money, groceries, entertainment, etc.
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Write down the ideal amount you want to save – for savings, investing, and/or retirement.
* If you are not sure of the exact amount, always approximate higher to maximize expenses as this will prepare you for almost any surprises.
Add up all the expenses you have, take this amount and subtract it from your income.
Do you still have money left over? Great!
Is your figure a negative number? Don’t panic if this is the case. There are ways of reconciling this, like cutting back on some expenses or finding ways to bring in more income.
Whether your number is positive or negative, you should still take the time to actually itemize your budget and have it all written down on paper or on a spreadsheet.
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Write your income at the top.
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Below your income, itemize each recurring expense in its own column. One column for your rent or mortgage payment, one column for your car payment, one column for your electric bill, and so on.
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Add a column with the amount you want to put toward savings.
Writing down your budget can be a real eye-opener. Some of you will compose a budget only to realize that you are spending more money every month on coffee than you are on your car payment. For some people, just seeing it in print is enough to prompt them to change their spending habits.
If you have a deficit on your budget, start scanning the columns and figure out what you can cut back on. If you decide that you will only spend $350 per month on groceries instead of $450, then maybe the extra $100 per month will cover your deficit.
The hard part, however, is to actually follow your budget. Don’t go through all the trouble of composing a budget to only turn around and go right back to spending as you always have. A written budget is an invaluable tool, but only if you actually use it.
If you notice that your credit cards, medical bills, and other unsecured debts are absorbing too much of your income on a monthly basis, you can speak to one of our debt specialists and receive a free consultation. The National Debt Relief Group offers programs which can cut down your monthly payments by more than 50%. You can fill out our Short Application and one of our debt specialists will contact you within minutes, or you can call now – (888) 703-4948.
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