A Personal Finance Budget is like a friendA personal finance budget starts with nothing more than putting ON PAPER what you have been doing your whole financial life. That is, knowing how much income you make and what you spend it on. That's 80% of it, what scary about that?Many a times people don't do it because they think it's complicated. Nothing is further from the truth. Here is a simple process that should work:1) Get a notepad and write down yours and your spouse's income, divide by twelve to get your monthly amount. Then spend a few minutes listing every single expense (no amounts, just the name) you and your family incur.(ie taxes, telephone, cable, mortgage, rent, insurance , pet grooming, student loans repayment etc). 2) When you have a complete list, review it to include periodic charges such as quarterly water/sewer bills, semi-annual children's tuition or yearly tax return preparation. 3)The next step is to track your actual expenses for a period of 4 weeks. If you can't write down everything you spend daily, save all receipts (grocery, gas, doctor's co-pay etc, car wash etc). At the end of the month get all this together plus your regular monthly bills (utilities, phone, cable etc) and total up by categories. There are many FREE budget worksheets you can download from this site and the net. Similarly there are several good budgeting and personal finance software that will help you create a personal finance budget and track your expenditures with minimal effort. I have used Quicken since 1991 and am very pleased with it. YNAB and MvelopsFREE Online Budgeting System 4)Now comes the crucial moment in building your personal finance budget. Take a look at each category and SEE how much you are spending. I bet you never thought that the 3 lattes a day that you and your spouse each consume would add up to $360 a month! ($3x6=18*20 workdays a month) WOW, that's a real eye opener! Maybe you can gradually scale it down to two then just one a day. Does the dog need grooming every month or can you wash it at home? ($50*12= $600). This exercise is a terrific opportunity to really look at what's a NEED versus a WANT and trim. Be realistic, it's better to start small and be able to sustain it. Once you see results, you'll want to do more. 5)Would you like to pay off your student 's loans faster? increase your 401k contribution by a couple of points? Pay off those credit cards? These are all Good USAGE for the savings you accumulate by trimming the fat. Make sure you ADD these new categories or amounts to your Modified budget. 6)Total your income and subtract your expenditures. Do you have money left over? If so increase your savings or eliminate debt. Do you have a shortfall? Re-examine the numbers to see where you could reduce further,
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7)Now monitor this spending plan each month by comparing it to your current expenses and making sure you stay the course. Just like a good friend, a personal finance budget will give you insight into your financial life and help coax you in the right direction. A budget, far from being restrictive, EMPOWERS you to consciously CHOOSE how much, on what and when to spend your money, including the FUN STUFF!
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