How To Budget Your Way To Financial Success

You bring home your paycheck, yet at the end of the month, after paying your bills and spending a little on some discretionary expenses, you realize it's gone. So, to make ends meet you reach for those credit cards. Where did all your money go? There must be somebody to blame. Well, there is. It's you! Big surprise, right? Face it, you can't keep spending more money than you make. But how do you take control? How do you make sure that you're handling your money and it's not handling you?

The answer: Budgeting.

Budget Basics

Simply put, creating a budget shows you how much money you have to spend and how best to prioritize where you spend it. Knowing these facts allows you to plan and control your spending. When you truly take charge of your money you'll have better control over your financial goals. To get started, just follow these three easy steps:

• Write down and add up how much money you bring home each month. Label this as "take home pay." If there are two people working in your family, add both paychecks.
• Next, make a list of all the fixed expenses you must pay each month. You probably have these memorized. They're the ones that are always there: your mortgage or rent, car payment, insurance, cable and internet bills, grocery expenses, utilities (gas, electricity, water). Don't leave any fixed costs off the list. Add up all these numbers and label the total "monthly expenses."
• Now, subtract your monthly expenses from your take home pay. If your monthly expenses are higher than your take home pay that's a sign of trouble and that means some of those monthly costs will have to be reduced. If you can't find ways to reduce these expenses, you will need to reevaluate what you are currently spending on necessities. They may really be luxuries that you can live without.

When you truly take charge of your money you'll have better control over your financial goals.

Smart Saving

When you are lucky enough to have a bit left over at the end of the month - then it's time for a party or perhaps a quick junket to Paris, right? Not so fast. Before you go on a spending spree, put that monetary surplus to good use by paying down debt and building up your savings account.

• Paying down your unsecured debts, such as credit cards, should be your first priority. Target your smallest balance first, paying a certain amount towards it every month until it's paid off, while paying the minimums on any other cards. Once that first credit card is paid off take that amount and apply it to the next card on top of its minimum, until it's paid off - and so on, and so on.
• Once you've got your credit cards paid off, work toward bulking up your savings. Take the money you had been using to pay down your debt every month and have your bank automatically transfer it into a savings account. After all, you've gotten used to living without that cash every month, and if you have the bank directly deposit it into savings, you won't be tempted to fritter it away. Just how fat should your savings account be? Ideally, you should set aside at least three months' worth of expenses.
• Decide how much money you will need for discretionary spending. These are the expenses you have some control over: entertainment, eating out, gifts, etc.
• Now for the hard part. Continue to stick to your budget! Promise yourself that you'll only spend the amounts you've budgeted for in every category. For example, if you've allowed yourself $35 for eating out, spend it and enjoy it - but when that $35 is gone, so is your next trip to the restaurant. At least until next month. Not exceeding your allotted amount every month will help ensure that your spending will stay in check, your credit card will stay in your wallet and that mountain of debt will start shrinking.

Putting together a budget can really be an eye-opening exercise, especially if you've never done it before. Seeing the numbers laid out before you in black and white will enable you to really see where your hard-earned money goes every month - and it might just give you the inspiration you need to take control and reach true financial independence.

Creating a Realistic Budget

Use this worksheet to get started on the path to financial success.

Take Home Pay
#1	$
#2	$
Other	$
Total Income	$
Monthly Expenses
Mortgage/Rent	$
Car Payment(s)	$
Insurance (Auto, Life)	$
Utilities (Gas, Water, Electric)	$
Cable/Internet	$
Groceries	$
Total Monthly Expenses	$
Balance	$

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