Why make a budget you ask? How about your future! That's right if you don't know the "how's, when's, and where's" of your finances you are in serious trouble.
Your finances are your means of existence in our economic system, and if you fail to meet your financial obligations chances are you will be living in your parent's basement the rest of your life.
A budget takes less than five minutes to setup and even less time to maintain with a free budgeting program like MS Money, Quickbooks, or Quicken (download them at their websites).
You can also download free budget templates in MS Excel from Microsoft's MS Office's website, so you will not have a problem finding the software.
Also, nearly every financial institution in America allows online banking, so all you have to do is create a link between your software choice and your bank, and it downloads your information for you.
You should then breakdown your information into expenditure areas (i.
e.
Did you shop too much last month?) to find areas where you can increase or decrease the funds in those areas.
You do not have to collect receipts and turn yourself into an accountant since its done for you.
Your job is to manipulate and organize your budget according, and this article will give you a very quick method of doing so.
1)Determine how much money you bring home per month.
2)Calculate your core expenses.
These are things like mortgage (or rent), food, water, utilities, etc.
3)Subtract #2 from #1.
The remainder is your "leftovers balance.
" This is the time you must consider your luxury items.
I hate to say it, but a cell phone is still a luxury in this day and age, so just because your arch nemesis has a cell phone doesn't mean you have to have one too.
If you have very little remaining after your core expenses, begin cutting back on your luxuries.
Start with things like eating out, frivolous shopping trips, even go so far as eliminating your annual vacation if necessary.
I know its difficult, but it is absolutely vital that you maintain your bank account in the "above water" category.
If you are at this point, you are living at your own risk financially and need to pay very close attention to your spending habits.
Don't forget, somewhere in this mix you need to plan your retirement savings as well.
Once you have calculated your leftovers, subtract your current luxury items from your leftovers balance.
If you receive a negative number, start eliminating luxuries.
If you still have positive cash flow, you have the ability to acquire more luxury items but consider this: how much do you have in savings? If you have less than a three month income equivalent in your cash reserves, start building up your emergency fund immediately.
This can save you financially if you are suddenly downsized, get injured, or have some other type of emergency that takes you away from your job.
Even worse, someone steals your credit card number and temporarily plays havoc with your credit.
Example, when I purchased my first home, my credit card number was stolen before I had paid my first mortgage payment Imagine that type of stress on a first time home buyer! Think of your budget as your rules to live by.
Similar to those things your parents taught you about swearing in public, opening doors for a lady, or similar cultural values that a supervising adult wanted you to follow to be a productive member of society.
If you don't do this, chances are you will find yourself in debt and become a drain on those who care about you.
Not to mention the taxpayers paying for your mistakes (i.
e.
higher insurance premiums, higher interest rates, etc.
)