Budgeting – Set Goals, Create, Saving Money

Setting financial goals for you and your family is a key component to your security. Most people find setting goals easy. It may be that they want to retire at age 50, or perhaps buy new car or pay for your children’s education. Goal setting is really the easy part of personal finance. The most difficult challenge is creating a road map to reach that financial destination.

Creating a budget and then sticking to the budget is among the more difficult things you will try to accomplish in personal finance. Budgeting requires discipline, planning and commitment. Now that you’ve established your financial destination by setting goals, you’re faced with the task of getting there.

Budgeting  and Setting Goals

Creating a realistic monthly budget or spending plan provides you with the vehicle to get you on your way. To create a budget, you need to know how much money is available, where the money is being spent and what adjustments need to be made. At its simplest level, a budget is a plan for making sure that money coming in matches favorably with money going out during the same period.

Many people do not budget their family finances until they are forced to make a change. For many people in or recovering from debt trouble, making and sticking to a budget is one of the toughest tasks on the to-do list. For some reason, many people hate the thought of budgeting. The list of excuses not to budget is long and expressed in a variety of ways. Perhaps you have used some of these excuses yourself.

• Budgeting makes me worry about my money
• I don’t have time to budget
• I can keep track of all those receipts
• I don’t know where to get started

We could go on and on with this list. In fact there are probably just as many excuses for not budgeting as there are people in financial trouble. There is no easy answer, and you will not find many shortcuts when you begin to budget your money. You may have to get past fear, anxiety, and anything else that may be preventing you from learning how to set up a budget, and implementing it as part of your personal finance philosophy. For the most part, budgeting doesn’t have to be complicated, time consuming, but, it does have to be done.

It may not be easy at first but you will find that in time, your budget will become an accountability partner from where you spend your money, and where your money comes from. Much the way a bathroom scale keeps you on track when you are trying to lose weight, a budget is objective. Properly maintained a budget will not lie.

The easiest way to begin is to track your total monthly expenses and your total monthly income. Obviously it will be your ambition to have your total monthly expenses less than your total monthly income. If it does not work out that way, you essentially have two choices. You can either earn more money or spend less money. It really is that simple. Without a balanced budget, no household can operate effectively.

When you begin to set up your budget it is essential that you are accurate and your budget is a true reflection of the income you have as well as the expenses that you have. At this point it would be important to add that you should create a separate column for savings. Saving money on a regular basis has to become as important as spending your money or paying your bills.

Creating a Budget

Creating your budget and implementing it require accurate records, and commitment. If you have never saved receipts to track spending, this process may seem tedious and unfulfilling in the beginning; however, you may be surprised as you become more aware of your spending habits. To track your finances, you’ll need some or all of the following record-keeping tools:

• A checkbook register to record every check and/or debit card purchase
• Tracking methods for recording out of pocket expenditures and credit card purchases
• A well-organized filing system for all financial and personal records

To maximize your checkbook’s useful features, use your checkbook register to record every transaction you make. And don’t forget to note ATM transactions, debit card purchases, any service charges on your account, and transfers from other accounts. Balance your checkbook frequently. It should be done at least once a month, although weekly is a preferred method. Online banking has made our financial records as close as our fingertips, and can be a useful tool for budgeting and tracking out-of-pocket spending.

Documenting your expenses is a key step in formulating, and sticking with, a budget. By tracking monthly expenses, you will be able to compare what you budgeted with what you actually spent during the month. This process will help point out problem areas, or places in your budget that require revision You will probably need to do this every month, at least until living within your budget starts to become a habit. Essentially you will track every penny that you spend on a day-to-day basis.

Some expenses are easier to track than others. Fixed expenses are those that don’t fluctuate from month to month. Your rent or mortgage payment, car payment and insurance payments are examples.
Variable expenses do fluctuate from month to month. Variable expenses can be more difficult to estimate accurately because they change from month to month. To document them, it may be necessary to track your expenditures for at least one month. Your utility bills, recreation and clothing expenses are examples.

Periodic expenses are those that typically occur only once or twice a year. Your vehicle registration, taxes, and holiday expenses are examples.

Expenses can also be classified as priority and non-priority expenses. Priority expenses generally carry an extreme consequence if not paid on time and in full by their due date. Mortgage payments are a priority expense. If not paid in full and on time the homeowner runs the risk of foreclosure. Non-priority expenses don’t generally carry such an extreme consequence. If because of your financial situation you’re unable to pay for your delicate clothing to be dry-cleaned, the only consequence is the extra effort that you have to expend doing it yourself. Again, documenting all of your monthly expenses will help you to not only prioritize your debts but it will also help you to more effectively establish a realistic monthly budget.

For most people tracking income is a much easier process. Whether or not you have one or two incomes or perhaps income from other areas such as rental properties, dividend payments for child support, is just as important to track your income as it is your expenses.

Budgeting  and Saving Money

The third and final component of setting are creating your budget is saving money. One of the things most financial counselors agree on is that saving money has to be a component of any household budget.

We find many people do not know how to save money and are in the habit of spending every dollar they make their living week to week and paycheck to paycheck. These habits are hard to break, however if you exchange a bad habit for good one, you will find it is much easier to accomplish your goals. And one principle that is foundational to your financial security is saving money. Remember,it will take energy, effort and commitment to set up your family budget, but without it, your road to financial security will be a failure.