Basics of budgeting for a better financial situation .
June 7, 2008 – 10:21 amEveryone in this world is trying his best to cope up with their financial situation. We all are struggling day and night to feel in control of our finances. If we are successful in managing them, which means monthly and day-to-day expenses are met, money can be saved for future objectives, donations can be made to a favorite charity, and money is still leftover to enjoy, then only we feel satisfied and happy.
“Economy is half the battle of life; it is not so hard to earn money as to spend it well.”
- C. H. Spurgeon
Then how can we experience the happiness that we are earning every month in terms of money. Yes here comes the magic of “BUDGETING”. A detailed list of expenses and sources of income makes it possible to manage your money and makes your dream true. Well it does not have to be a complicated process; simple application can make a big change in your lifestyle. It does, however, require a commitment by you and your family in order to be successful and get the ultimate happiness in your life. If you are bachelor then the case is different but family persons have to get the support from their family.
Now the question is “how do we do the budget?” This is really a big question. Not only it’s hard to get the answer it is harder to get it applied. Different people budget on their financial situation differently. It depends on the situation the person is living .The approach may be different but the basic remains the same.
Through a four-step process of investigating, organizing, recording and comparing, you can establish a budget to organize your finances.
1. Investigating :
First you should start researching on your current expenses and after tax income. All sources of income should be taken into consideration. You have to go back and check all your pay records and bank deposits to arrive at a reasonable average net income over the last month or year. You have to identify your spending habit. Now how you will do that .Just make a list of your routine expenses that occur monthly or quarterly, such as rent or mortgage, utility bills and car payment bills. Then briefly jot down your weekly expenses – groceries, transportation, eating out, entertainment, gifts, clothing, etc. – that you have come across over at least a two or three week period. Do include your savings or investment contributions and donations (to charity or church) during these periods.
2. Organizing :
Now review your research and make a table including the dates in which you have paid across the top and in the rows going down, your income and the categories in which you spend your money. After you have completed making the table start setting targets. These targets should include how much you plan to spend in each category on a weekly or monthly (whatever you choose) basis over the next few months, which should include paying down present debt and building up some fresh savings.
3. Recording :
After creating the first table the work is not over. You have to create another table. It will be same as your organizing table but here you will record your actual daily spending, no matter how large or small. You should record every item you buy no matter in what mode it is being bought i.e. with cash, check, and debit or credit card.
4. Comparing :
In this step, you actually have to compare your previously maintained tables. This is the final and concluding step of your budgeting process. Keep your organizing table and the recording table side by side and judge yourself on your achievements. Look at how your actual spending compares to the targets you have set.
If you find that you couldn’t achieve your desired goal then you have to increase your income or minimize your expenses. Many people create a budget but give up too soon when they think they are not meeting their goals. It is a trial and error process. You should keep on trying even you don’t succeed at first. Only through practice can make money management and following a budget easier and will eventually help you gain control of your money and reduce debt and move you closer to your financial goals.
