10 steps to making a financial budget from: money.cnn.com
Learn how to budget by following these 10 steps on how to bring your spending under control.
1. Budgets are a necessary evil.
They're the only
practical way to get a grip on your spending - and to make sure your
money is being used the way you want it to be used.
2. Creating a budget generally requires three steps.
- Identify how you're spending money now.
- Evaluate your current spending and set goals that take into account your long-term financial objectives.
- Track your spending to make sure it stays within those guidelines.
3. Use software to save grief.
If
you use a personal-finance program such as Quicken or Microsoft Money,
the built-in budget-making tools can create your budget for you.
4. Don't drive yourself nuts.
One
drawback of monitoring your spending by computer is that it encourages
overzealous attention to detail. Once you determine which categories of
spending can and should be cut (or expanded), concentrate on those
categories and worry less about other aspects of your spending.
5. Watch out for cash leakage.
If
withdrawals from the ATM machine evaporate from your pocket without
apparent explanation, it's time to keep better records. In general, if
you find yourself returning to the ATM more than once a week or so, you
need to examine where that cash is going.
6. Spending beyond your limits is dangerous.
But
if you do, you've got plenty of company. Government figures show that
many households with total income of $50,000 or less are spending more
than they bring in. This doesn't make you an automatic candidate for
bankruptcy - but it's definitely a sign you need to make some serious
spending cuts.
7. Beware of luxuries dressed up as necessities.
If
your income doesn't cover your costs, then some of your spending is
probably for luxuries - even if you've been considering them to be
filling a real need.
8. Tithe yourself.
Aim to spend no more than 90% of your income. That way, you'll have the other 10% left to save for your big-picture items.
9. Don't count on windfalls.
When
projecting the amount of money you can live on, don't include dollars
that you can't be sure you'll receive, such as year-end bonuses, tax
refunds or investment gains.
10. Beware of spending creep.
As
your annual income climbs from raises, promotions and smart investing,
don't start spending for luxuries until you're sure that you're staying
ahead of inflation. It's better to use those income increases as an
excuse to save more.
