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Money Budgeting - The Key To Financial Success
By Ken Black
Money Budgeting is a phrase that either bores them too much, or makes them depressed. But, this is how successful people deal with - they budget. It's a lesson that must be learned to succeed financially in this life. Here is some helpful information.
Many people are lured into the trap of spending more each week than they are bringing in and most people are doing this without even realizing it. The main reason this happens is because we are no longer taught or remember how to budget our money. With the introduction of credit, it has become easier to use that you don't actually have.
This lack of budgeting in today's world is beginning to reach a cataclysm with many families, and individuals who are now finding themselves with severe debt problems and little knowledge about how to turn their bleak situation around.
Even with all of the bad debt write-offs, banks are more than happy with the way things are. Banks build in their own risk factors based on bad debt in their interest rates to give them profit regardless of bad debt write-offs. Simply put, those borrowing are paying for their inability to budget effectively.
Tips to Effective Budgeting:
The basics of budgeting start with you listing incoming over a period of time, such as a weekly, monthly or fortnightly, then listing the outgoing money, such as mortgage payments, car re-payments, credit cards and so on. budgeting also has many other factors used to make it effective, including keeping a constant eye on how your budget is doing and changing it to accommodate unexpected problems without overspending.
Keep all of your receipts and account for what has been spent. Use this to make calculations as to where your is going and for what. Expenses can be divided into four main categories. These are:
- Housing: mortgage, rent, utilities, property taxes, insurance, etc.
- Work: transport, parking, work clothes, lunches and if you have children, day care
- Living: food, clothing, medication, insurance, etc.
- Personal: entertainment, newspapers, magazines, alcohol, gifts and education, etc.
Once you have categorized all of your bills, take out a blank piece of paper and a calculator. Figure out what is being spent each month on these categories and what can be cut out of the budget to allow more to go toward bills or improving your financial situation.
Many people get so used to luxuries, they turn these things into fixtures in their weekly, fortnightly or monthly spending habits. By weeding these expenses out or making them a luxury again that is only enjoyed occasionally, you can also save quite a substantial amount of money. When you go through your spending habits, you will be able to calculate how much you are actually spending on these things.
Don't forget that a contingency fund should always be factored into any budget. This works out to be around 10 % of your income. A contingency fund will benefit you when you need it the most, such as when you lose your job or have an unexpected expense such as plumbing go wrong in your home. This contingency fund should be kept in a separate savings account and only accessed in emergencies.
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