Basic Budgeting
Where do you start your budget? How much money should you put aside? Is it really that important to save? These are some of the most common questions faced by first-time budgeters. If you are looking for basic information about how to build a budget, you’re in the right place!
Knowledge is Power.
When it comes to money, knowing your strengths and weaknesses is important. Understanding where peoples knowledge generally falls short is a powerful tool to get you started on the right track. Michael Fischer, an investment professional, offers a brief synopsis of five misconceptions that people commonly make about money.
1. People often think that they have their money situation under control; in truth they are normally far from anything resembling ‘in control’. People are touchy when it comes to money and those that have not realized the reality of savings versus investing have a lot to learn.
2. The second misconception people suffer from is how the stock market works. People think that either you are good with stocks or you’re not. Unfortunately, it doesn’t work that way. There is often a balance to be reached between the two.
3. One of the biggest problems is consuming beyond your needs. Many people are purchasing more than they can afford because their attitude is that they should be “keeping up with the Joneses” — that everyone else is doing it, so why shouldn’t they. This leads to vast over-spending.
4. Another thing people think is that they would have to sacrifice a lot for saving and investing. Truth is, if some of the money that was being overspent went towards saving and investing, it would be a breeze.
5. The last misconception is thinking that there are professionals to take care of savings and investing, so it’s not required to learn about budgeting and financial matters. The truth is that the more you know, the better you will be with your finances.
Living on a Budget
Everyone knows what it feels like to be a little short when it comes time to pay bills. Setting up a budget and sticking to it can help you to pay all of your bills on time. Paying your bills on time will allow you to avoid high late fees and interest rates, and it can keep your credit history clean and your credit score high. Maintaining a budget is not a difficult thing to do, if you have basic math skills, you can keep a budget.
In order to begin budgeting your money, you first need to make a list of all reoccurring bills and expenses that you have. The easiest way to estimate your bills or expenses is on a monthly basis. Add up your list of known bills to get a rough estimate of your monthly spend, then add a little more to that estimate; by over estimating the amount that you pay every month it will be easier for you to stay within your budget.
Be realistic. Make sure that you have plenty of money to pay for all your necessities. After that, you can see how much money you can save every month and the amount that you can spend on non-essential items. Be careful not to overspend or exceed your budget and avoid taking money out of your savings, that money should be reserved for if an emergency arises.
Managing Your Money
Every new year, take the time to start fresh with your finances. Taking this time of year to start working on better money management is a great way to get into new habits that you can use through the year and beyond. Money management may seem like a daunting task, but just a few actions can help you get your finances where you want them to be.
When it comes to saving money, one trick that works great is setting money aside from each paycheck. If you have direct deposit you can actually have funds directly deposited into your savings account by either a percentage of your pay or by a dollar amount that you choose. This trick allows you to save money without the money actually crossing your hands.
Whether you choose to set money aside via direct deposit or by hiding it away in your sock drawer, the next step you should take is making a budget using the amount of money you have coming in, sans the money you are saving. Budgeting is very important in money management because it gives you a direct picture of how much money you have coming in as well as where your money is going out. The key to using a budget is listing your debts from smallest to largest and paying more on the smallest debt first. This method is called snowballing and works very well.
Another step you can take is finding where your spending weakness is and working on it. If you have a habit of hitting the department stores every time they are having a sale, then you may want to consider planning a low-cost activity to keep you away from the store so you are not tempted to run in and spend money. Also, taking the initiative and learning about financial matters you don’t know much about will help you become more financially sound. The more that you think like a millionaire, the easier it is to become one!
By following this handy, simple budgeting guide, you can be saving more money and getting yourself on the track to financial stability in absolutely no time.
This entry was posted on Thursday, October 20th, 2011 at 5:04 pm and is filed under Budgets & Money Management. You can skip to the end and leave a response. Pinging is currently not allowed.
