Getting Started with Your Budget
Many people say they spend more time planning a vacation trip than planning their financial future. They feel repelled and constrained by the budgeting process. Just the word “budget” makes them shiver! But a budget can be like a vacation trip plan: it helps you plan your finances in advance.
A budget, simply put, is a plan about what you will do with your money and a tool for uncovering problem spending areas and improving cash flow. Creating a budget can help you organize your financial information, set your goals, and take control of your financial resources.
Your budget should include a thorough list of all of your income and expenses. A basic budget usually covers a one-month timeframe. Although some expenses and income items are paid once a year, such as annual dues or property taxes, these irregular items are managed on a monthly basis. The simple process of gathering your financial information to begin or maintain a budget can help you control your spending
and identify cash available to save, invest, or pay off debt. It is important to know that all budgets are not created the same! Some are overly complicated. Others require constant monitoring. Finding the budget that works best for you and your specific circumstances is important to the success of your budgeting process.
A budget does not tell you “the right way” to spend your money; it helps you make decisions about how to best spend your money to fit your goals and dreams. What is good for one person or family may not necessarily be appropriate for the next person. A budget is a tool to help you make sure you are choosing to spend your money in ways that are the most favorable and satisfying to you.
Where Do I Begin?
You should begin to budget NOW! The sooner you begin a budget, the sooner you can realize the benefits. The decision to begin a budget now can create a new foundation in your life to help you form your actions, decisions, thought processes, experiences, and accomplishments for the rest of your life.
Don’t keep living paycheck to paycheck!
Don’t spend more than you make!
Don’t work until death to pay for your haphazard spending habits!
There is no better time than the present to take control of your finances. Because situations differ from person to person and from family to family, no two budgets are exactly alike. Each situation includes different factors, such as size, ages of family members, income, upbringing, and lifestyles. These factors make a difference in the way you view money and make money decisions.
Considering the following points will help you create a budget that best fits your particular situation:
One factor to consider is the makeup of the family unit. Whether you are single or married, or whether you have children or dependents, your particular situation impacts your budgeting plan.
Another factor is ages of family members. The expenses and income of a young single person will differ from those of a retired single person. Similarly, a family with younger children will have different financial requirements than a family with children near college age. You need to provide for various expenses, including savings and investments, depending on the ages and goals of those involved.
Your lifestyle is another factor to consider. Your tastes, talents, values, beliefs, and attitudes will also make a difference in what you determine to be important in your total financial budget. Determining what is important to you today vs. what amount you’re willing to set aside for retirement will make your particular budget unique to you. Your occupation and interests will affect your budget. For example, you may
have a talent for home repair that allows you to reduce maintenance expenses in your home.
Beginning the budgeting process involves looking at how you are paid and how you are billed. Those who have a regular income, such as a paycheck every two weeks, create a different budget setup than those who are paid irregular amounts and times, such as someone on commission. Also, having regularly occurring expenses, rather than irregular or random expenses, makes a difference in your budgeting process.
If you are you planning a major change such as marriage, relocating, changing jobs, or buying a house, your budget can be affected.
