A budget is a plan for your future income and expenditures that you can use as a guideline for spending and saving. The foundation of financial success is the creation and maintenance of a sound budget. While in theory it's an easy job, simply record all income and subtract for expenses then look at the bottom line. Either you have a surplus or deficit or maybe your budget is balanced. Typically, balancing a budget takes time and discipline and it's not common that the first time you create a budget it will be balanced. It’s important to remember that budgeting is not a one-time thing but something you use throughout your life. As events and circumstances change so must your budget.
A budget is only as successful as you are honest with its contents. Budgeting requires a certain amount of forecasting and tracking. I am sure you can easily identify the obvious expenses such as, auto payments, rent, mortgage, utilities, etc. But it’s the in-between expenses that most forget to include in their budget. Items such as vacations, holidays, entertainment, clothing, auto repairs, incidentals, etc.
Where to start?
It’s important to start out with the tools necessary to succeed. A detailed budget worksheet will help to organize your income and expenses and reveal all expense items. If using a calculating budget worksheet your bottom line will change each time you make adjustments to your budget. This will allow you to see changes as you start to make adjustments. Start to collect your bills, bank statements, and receipts as this will help you to populate your budget. Budgets are mostly based on your monthly expenses so you may need to cultivate your budget over time as you collect this information.
If your expenses are greater than your income your budget’s bottom line will show a deficit. Conversely, if you are spending less than your income your bottom line will show a surplus. If you have a deficit you will need to start to trim some expenses and or increase your income. If you have a surplus you may want to consider adding to your savings and reserves. Your objective is to create balance within your budget.
Most people are over ambitious when they create and start to implement their new budget. While their intentions are good budgets must be realistic in order to work. When starting out a new budget will take at least three months to get dialed in. Be patient…
Track & Trim
As you track your spending habits while testing your budget it will occur to you where you may be able to trim or cut back on certain expenditures. This doesn't’t necessary mean that you have to eliminate certain items from your budget, although you want too, but rather to reduce the amount you spend on them. First you need to identify those items that can be reduced. Fixed amount items such as rent, car payments, student loans, etc may not be able to be reduced because they require the same amount to be paid each month. However, flexible bills such as cellular phones, utilities, entertainment, can be reduced because they are based on usage. If you use less you pay less. Easy right?
These worksheet will help you start to create your budget. Remember the idea is to live within your means while paying attention to your budget. Good Luck!
If you need help creating or modifying your budget call our office at 1-800-498-0766 ext 190 and speak with a Certified Credit Counselor.
Debt Consolidation Reviews
A debt consolidation program or debt management plan may be an effective option to eliminate debts. A Certified Creditor Counselor will review your budget, debts, and income and help you determine if debt consolidation is the right choice.