To live the good life on limited resources, one must learn to budget wisely. A budget is nothing more than basically a monetary plan, outlining your financial goals. Having a budget, you can well establish and regulate funds, set and achieve your financial objectives, and make advance decisions as to how you want your finances to function well for you.
The main idea in budgeting is for you to put aside a certain amount of money for expected as well as unexpected costs. Simply put, budgeting means estimating monthly home expenses basing it on previous expenses and bills, and figuring out what you need so you don't have to worry about money.
The initial step to take in budgeting is to find out how long will your compensation last. Define fixed expenses like car payments, home rental, insurance, etc. Likewise follow up your expenditures thoroughly for a month so you can discover and understand where your funds are going. Through proper determination of your “spending patterns”, you can immediately identify solutions for effective budgeting. Use a computer program (there are a lot of good Open Source Programs you can find using your favorite search engine) or a paper ledger (a notebook would work as well) to track your spending for a month or two to discover these patterns.
For instance, when you have a steady monthly income of $4,000, you should subtract all your identified monthly bills from that income.
Other bills can be assessed and then subtracted from the amount of your income. The balance that remained after fixed costs can now be your budget in the household. Rather than allocating money for miscellaneous like gas, clothing, entertainment and groceries, financial planning will allow you instead to use proportions or percentages of it.
The strategic solution in order for budgeting to be successful is inflexibility as well as flexibility; there are fixed expenses so payment must be an inflexible factor. Budgeting will best work when very scarce omissions are made to greater limits. The idea here is to formulate goals and plans, then abide by it as much as you possibly can.
Here are tips on how to make a budget that you can live with:
1. Adopt a good sense of money management. Your attitude is essential in anything you do. Reach an agreement with yourself, and make intelligent compromises and know the importance of reducing unnecessary expenditures; it all involves a lot of sacrifice but will be good for you in the future.
2. Plan out your financial situation. Make a list of your income to one side and your fixed expenses on the other side. Then subtract out a percentage of the difference and make that your monthly savings for emergency purposes. The rest is what you can use for "luxury items".
3. Know the difference between luxuries and necessities. List down what you believe as luxuries, with it, split the list in half, crossing out half the list. Do you really need to buy those DVD's, CD's or video games? Couldn't you get them from the library for free?
4. Practice frugality but with dignity. You can have fun with little or without spending at all. Rather than going shopping, or being the life of the party, learn to enjoy simpler pleasures.
Budgeting is an effective and fundamental tool that is can be used easily by everyone. Consider making one, sticking to it, and benefit from eh fruits of your savings.
Mahalo.
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Tips and techniques outlined in our ebook “Debt Free Living”.
For more information:
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