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Personal Budget
Planning
©
2003 by Mark Carney, First American Debt Consolidation
and Loans
A personal budget is simply a plan for handling your money.
Creating a financial budget for yourself and your family has never
been more important. It is something that should be created by
everyone regardless of their financial situation. If a person is in
good shape financially a budget can help them maintain or improve
their position. A person who is struggling can use this helpful tool
to turn their situation around. A third group of people who can
definitely benefit from a personal budget is those who have/had
financial problems and have turned to a consolidation loan or some
other means of relieving the debt. In this case the debt is just a
symptom of the root problem. The real problem is the pattern of
spending and if left unattended they will end up back in the same
troubling situation at some point in the future.
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With these things in mind how do you go about creating a budget?
The initial step is a two-part process:
- List all of your income (per month). This can comes from your
main job, a side job, investment dividends, etc. If something pays
out once a year then simply divide by 12 to get a monthly figure.
- List all of your expenses (per month). These include house
payments, car payments, insurance, food, clothing, etc. If you
only pay an expense once a year than divide by 12 to get a monthly
figure. The more thorough you are on this step the more accurate
your budget will be.
- Subtract your expenses from your income. This figure
constitutes your disposable income. Although this money represents
money that is above and beyond your expenses it is still very
important to create a plan on what this money will be allocated
for on a monthly basis. (see # 5) Note: if your expenses are
larger than your income, than in most cases you will need to cut
back on expenses.
- Analyze your expenses. Are you spending a lot of money in an
area that is unnecessary? (i.e. designer coffee every morning) If
so than this may be an area to adjust. It is important to
understand how you are spending your money, so you can make
changes if necessary.
- Set goals. Determine such things as: when you would like to
retire, places you would like to travel, how much education will
cost in the future, when you would like a new car. Next, determine
how much each of these things will realistically cost and begin
setting money aside to achieve these goals.
Faithfully sticking to a personal budget will provide the
financial freedom that so many people are lacking. It will help you
avoid potential financial pitfalls while helping to achieve your
monetary goals.
~~~~~~~~~
About the
author:
Mark Carney is a professional consultant
with First American Debt Consolidation, a debt
consolidation
service
specializing in
financial education, credit counseling, and debt reduction services
nationwide.
The
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