Budgeting

Many of us have negative connotations associated to the word budget. We feel it is restricting, not allowing us the freedom to spend our hard earned money the way we choose. We view budget as something which needs to be done by those who are struggling financially. Budgeting, however, is a fundamental concept which must be adhered to if financial success is to be achieved. Having a budget is a common characteristic among those who have earned their financial success. The lack of a budget is a common theme, typically, among those who are struggling financially. Budgeting isn't punishment for not being wealthy. A budget is a means to determine where your money is going, something we all need to be able to do. Creating a budget is a way to determine whether you are spending more than you make. At the heart of financial success is spending less than you make. You simply can't spend more than you make, at least not for long. So, what are the basics? The two fundamental questions to answer when creating a budget are; "What's going out?" and "What's coming in?"

The place to start creating a budget is figuring out where your money is going right now. There are a number of ways this can be done. You have to discover what works for you. I have tried different approaches to tracking expenses, computer software, spreadsheets, notepad, and check register. I have found a simple excel spreadsheet works best for me. Easily customizable, spreadsheets do the calculations I need and I can input the information in a manner that best suits my needs. You can start inputting entries from bank statements, credit card statements or from where ever you can obtain the information for the budget. Track you spending for about a month. Adding up the amounts will give you a good idea about your spending habits. A few guidelines in setting up your spreadsheet are listed below:

o Typical categories are housing, food, recurring bills, and entertainment.

o Categories should fit your lifestyle. Include those areas of spending that are unique to you.

o Account for the once or twice a year expenses such as auto insurance and taxes.

The next area to address is what's coming in. Determine your monthly income including wages, interest income, dividends, and bonuses. Once you know how much you make and how where you are spending the money, you've got a budget. Adjust the spending until you achieve balance between your income and expenses. Your goal with the spreadsheet is to fine tune it until you have a line item for all the income and all the expenses you incur. This fine tuning process will highlight areas of spending which may be out of your perceived spending plan. By having setup the budget you are now equipped to make the adjustments needed to bring about financial success.

The final step is to get into the habit of budgeting. To be successful this will take persistence. You will have a number of slip ups along the way. Don't be discouraged by this. The goal is not perfection in record keeping, but, rather money management. Here are some tidbits to help you on your journey.

o If you can't spend less to bring balance between income and expenses, earn more.

o Pay cash whenever possible and record the transaction.

o Develop a habit of thinking ahead. Plan for upcoming situations and prepare for it.

o Keep good records. If you don't write it down, chances are you won't stick to it.

o As your finances change so should your budget. View the budget as a living document that changes with you.

Creating a budget is advantageous when planning for your financial future. The budget is really a tool to determine spending patterns and habits. A budget is a way in which you can take control of cash flow. An excel spreadsheet or computer software can be a viable resource when creating a budget.