Business and Finance

Budgeting, though tedious, is probably one of the most important actions an individual, couple, or family performs – or SHOULD be performing. Without proper tracking of where you spend your money, you can never make much progress towards your Goals. Without knowing how much money is coming in vs. how much money is going out, it’s tough to progress financially. Instead, the majority of Americans resort to Credit Cards or consumer debt and dig themselves into bigger holes.

“A fool and his money are soon parted.” – Unknown

So I’m going to briefly cover some of the important points of Budgeting and learning to control your finances. Keep in mind that the majority of lottery winners end up broke again only a few years later, and it’s common for professional athletes who had earned MILLIONS of dollars over just a few years to lose it all and end up bagging groceries. This is proof enough that MORE MONEY will NOT solve your financial problems – unless you learn how to manage the money that you DO have.

First, make a general list of the financial obligations (monthly expenses) you currently have, such as: rent, power bill, food, gas, car payment, entertainment, etc. and write down or estimate how much you spend on each. (for non-monthly expenses, divide them to figure out a monthly cost – ex. A yearly magazine subscription of $50 = $50/12 = $4.16/month. I pay my car insurance only twice a year, so I divided it so I could set aside a set amount per month.) Read more

In these hard times, it is essential to manage one’s finances and invest on things wisely. Not only can you benefit from it in the long run but you can also become more mature and knowledgeable when it comes to handling your finances. That is why, it is important to come up with effective and doable budget plans to ensure the future for you, your family and your business.

What is budgeting?

The word budgeting come from the short word “budget” which means allocating funds that is available and can be readily used in case of any emergency. It is a strategic way of planning for spending and saving your money. It is done by making a calculation and estimating your monthly earnings and expenses (it also involves all your bills, debts and any other purchases which involve shelling out some money). Budgeting is known to be an essential task in every individual’s financial situation and way of living since budgeting is the determining factor of where you are in terms of your fiscal status. Also, budgeting entails a lot of self-discipline and determination, for it can be a daunting task to observe since we have endless needs and wants.

What is the role of budgeting to debt management?

Budgeting and debt management always go hand in hand. Budgeting during a debt management process is one of the initial steps when it come to controlling your income and expenses. With the help of budgeting, not only can you have a successful debt elimination and a debt management process but you can also benefit from fiscal constancy and freedom. Read more

Budgeting is the process of gaining control over the use of every dollar you earn. It is the process of striking a balance between income and expenditure. Making a budget can be a daunting process, but it is very much within your control, not to mention necessary! Once you track where the dollars are going, you can estimate how much can be used for cutting expenses, put into savings and spent on yourself.

When creating a budget:

1. Determine your income: You need to total the amount of money that comes to you in the form of salaries, dividends on shares, interest on savings etc It is important to know the total of your wealth, assets and monthly income

2. Estimate fixed expenses: You may have fixed expenses each month like your rent or mortgage, utility bills, car payment, cell phone etc. Savings MUST also be included in this item. Ideally, you should set aside 10% of your income as savings.

3. Next estimate variable expenses: Variable expenses are items such as travel, dining out, entertainment, groceries, clothing etc. It is in this category that there a big opportunity for money management and finding new money, especially when it comes to cutting down expenses.

4. Then evaluate your income and expenses: An important task of budgeting is to evaluate whether expenses are within your income. Are you spending what you can actually afford? You would be surprised by the number of people who do not live within their income. If expenses do not match income, you must make cuts in your expenses, start with your variable expenses and you’ll be surprised on where you can cut back. If you’re living within your income, you will have a surplus of income over expenses, and this extra money needs a place to go.

Now, all you need to do is make sure to keep a track of your expenses: You should keep an account of all expenses, both fixed and variable. This ultimately will help you bring your spending under control, and show exactly where your money is going.

A necessary part of budgets is an emergency fund, 3-6 months of your gross income (total income earned before any taxes and deductions). According to your emergency needs, adjustments may have to be made in your spending and saving habits. An unforeseen illness, expense or job loss is bound to happen at some point or another. Having an available liquid emergency fund can provide short term relief.

Cash is king, or so the saying goes – use cash for budgeted items and avoid purchasing goods with credit cards. Follow these steps, and you will create and maintain a great budget, not to mention on the right direction to financial freedom.