The word “budget” is one most consumers hate to talk about; hence they avoid this topic by any means necessary for numerous reasons.
Here are the three (3) common reasons consumers fear budgets:
1. It makes them feel nervous to venture into the unknown
2. They simply don’t want to face reality
3. They think a budget requires impossible sacrifices that will affect their lifestyle
But a budget doesn’t have to be that way. Budgets can actually be fun and very rewarding.....
Here is a simple but rewarding way to set up a successful budget.
1. Gather all your monthly bills (credit card statements, store credit cards, loans, car loan statement and utilities bills etc.)
2. Be sure to include onetime spending such as: Entertainment, Vacations, Special Holidays, Birthdays and Christmas Gifts. Estimate your yearly spending for these special occasions then divide them by twelve to get the amount to be included in your monthly budget.
3. Now, don’t forget your savings, actually this should be accounted for before expenses. And yes, your savings is not negotiable! It could be a fixed amount or at least 3-5% percentage of your monthly salary.
4. Create two bill payment folders. Label one folder bills due 1-20th of each month and the second folder, bills due 21-31st of each month.
5. Pay your bills twice per month preferably on the 1st and 15th of each month or align with your salary pay schedule. Paying bills twice per month creates a pattern of consistency instead of operating haphazardly, hence missing payments. The estimated time is approximately 30 minutes twice per month to organize, pay and record all bill payments.
6. Use a monthly budget tracking form; such as excel, a free online budget planner or a simple writing journal. To get a copy of our budget tracking book click here.
7. Key: a good budget tracking sheet should have a blank column where you can list all your bills by due date. Plus the following columns: payment amount, type of expense, date bill paid, amount paid, outstanding balance owing, interest rate, interest paid, principal paid and the purpose of the loan.
8. Add up your total income. Subtract total expenses and forced savings. If your expenses are well below your monthly income, you’re in good shape! If on the other hand, your expenses exceed your income, you may need to cut your expenses or seek professional help from a financial planner.
9. Be sure to tally your total amount paid in interest every month. This could be a real shocker….. Especially if you’re paying mostly interest every month and very little principal.
10. Every month plan to spend at least one hour with your bills, calculator and budget planner to get organized for the next month. It’s best to plan for the upcoming month between the 25th -28th of current month. This will ensure you’re always a step ahead and well organized when the new month arrives.
11. Make sure you are constantly accessing your balance owing, interest rate, interest paid and purpose of loans. If your interest rates are on the high side, this may be a good opportunity to negotiate the interest rate with your bank or consider other banks with lower interest rate.
There you have it… simple, but rewarding way to set up a successful budget!
After Reviewing Your Budget, Ask Yourself These Two (2) Simple Questions….
This will give you a good outlook on your finances!
1. The credit cards or loans that I’m currently paying, why do I have them?
2. Are they worthwhile investments?
If the answer does not include a worthwhile investment, attack your debts by paying them down immediately!!!!
Pictures courtesy of Microsoft Word clip arts.
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