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Understanding Money: Smart Secrets to Budgeting

by Abundance G

Many times we want nothing more than to be able to effectively manage our finances. After all, we work hard for the money and hate seeing our money going towards things we do not want it to. This is the reason why families need a budget. A properly executed budget, should help you see where your money is going, get more bang out of each buck, and help you save some extra for future goals and dreams.The first smart thing to do in budgeting is to set a goal. You have to determine what you want to achieve? Is your desire to be able to pay your monthly bills on time? Do you want to buy that hot new plasma or do you need a new car? Goals help to shape your budget and budgets help to best serve your interests.

Secondly, should carry a small notebook so you can write down what you spend your money on. This will help you know without a shadow of a doubt where your money is going. This notebook should include everything little expenditure that we likely never track like, groceries, trips to the local ice cream shop, the Friday night video rental and so forth. Don’t forget to track these everyday miscellaneous purchases religiously. This is the only way you will be able to stop, cut and drop little purchases that add up big at the end of each month.

Once you’ve identified these regular expenditures, take into consideration what you need to do to cut them out of your budget all together. Your daily caffeine fix and your daily paper is costing you an estimated $3500 per year. Over a ten year period that is over $35,000. Now you may love coffee but if you are going to invest in it that much, it should be paying you some sort of interest. Start a coffee pot savings fund. Each time you feel inclined to buy your daily cup of joe, put that money into an envelope and at the end of the week start depositing it into your savings account. After a couple of months deposit that money into a mutual fund (Not at the bank) and allow the company to make a monthly withdrawal each month from your new coffee fund.

Debt is a vicious cycle and you should avoid it at all costs. If you are already in debt then, you should be drawing up a plan to take some of the coffee fund money to begin paying off the little bills.

Even though most people believe that you should be keeping up with the Jones’ with all their continuous payments, don’t do it. The best way to deal with this is to use your credit cards to pay for your monthly bills and then pay off your credit card each month. You should not ever be paying for your monthly bills with your earned income because you do not build credit doing that. Pay the minimum on all of your debts in order to avoid paying extraneous late fees. Then stack your bills by paying extra to the smallest bills, then when the smallest is paid off pay the next in line with that extra money until everything is paid off. This way you eliminate the little debts and can put the extra money on top of the bigger ones to accelerate the payments. If you do this faithfully, you’ll be amazed at how much faster you will get out of debt.

The last and most important step is to jot down the amount you earn and compare it with the sums you are spending. Create a system that works for you and will help you keep track of your monthly budgeting progress. You can make use of computer cash management programs, or download a database spreadsheet at www.financialbasics101.com/forms.html.