WHY IS BUDGETING IMPORTANT?
Living life without a budget is like going somewhere without GPS. You may never reach where you want to go without it.
Personal budgets can help you in four major areas:
1. As a money management tool: By keeping a personal budget, you'll know how much you are spending and where you are spending it.
2. As a way to gain control over your finances: Sticking to a personal budget puts you in charge of your money. By tracking what you spend, you will make better financial choices for yourself.
3. As a way to get organized & de-stress: Personal budgeting allows you to better organize bills, receipts, payments, and any other financial statements you may receive. You'll worry less about bills once you start keeping track of when they are due, which ones you've paid, and which still need to be paid.
4. As a communication tool: Your budget will provide a way for you and your family to talk through financial issues. By learning where and how money is being spent, your family can discuss ways to achieve smarter spending and saving.
MOST IMPORTANTLY, a BUDGET will help you SET and TRACK GOALS!
BUILDING A BUDGET
The first step to starting your budget is understanding the major components that make up a budget. A budget includes income (money coming in) and expenses (money going out).
Income is the money that is available each month to pay bills, buy groceries, etc. Your main source of income is almost always your paycheck from your job(s), but other income can include child support payments, alimony, or government funds such as Social Security or Disability payments.
Expenses are the month that is going OUT of your budget -- this could be to bills, food, entertainment, etc. Write down your monthly expenses, then take a look and see what areas of your budget can be reduced.
You need to ask yourself questions such as:
Do I need to spend this much on cable or satellite?
If I do a bundle package with cable, internet, and cell phone could I save some money?
How much can I save by using coupons for my groceries? Am I spending too much money eating out?
Take a serious and realistic look at your budget and be willing to make reductions if that is what is needed.
The bottom line is that if you want to reach a financial goal, some sacrifices will have to be made. Unfortunately, our generation wants instant gratification and waiting is not an option we like to consider. Our parents and grandparents did not spend what they did not have. This is a pattern that more of us should adopt if we want to reach our financial goals.