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Most people do not realize the beauty of budgeting and often end up in financial distress finding it difficult to manage their household finance, debts and other financial aspects. Well, ideally every household must have and should follow a proper budget so that they can live their lives happily and enjoy the benefits if financial freedom.
You will hardly find any company that do not have a monthly as well as yearly budget to follow This keeps them going enabling them to make proper plans for the future according to their present financial conditions. Just like all successful businesses all over the world have a budget, you too should have one in place. Why? Because, it works!Typically, making money and budgeting seem to go handinhand.
According to a Gallup poll conducted in 2013 it was found that only one in three Americans have a detailed written or computerized household budget prepared. However, over the years people seem to have realized the beauty of budget and things have started to improve to some extent.
According to a Bankrate.com survey in 2015, it is found that about 36% of the population prepared a household budget on paper and about 26% on a computer or even on their smart phone app.
On the other hand, a considerably high 18% of people said that they did not have any budget at all and took things as it came keeping every information in their head!.
If you are one of these non-budgeters or sketchy budgeters, it is high time that you change your approach towards household finance management. This is the best way in which you can keep a track of your income, your expenses and by sticking to your personal budget you can save a lot of money as well for the exigencies.
The terminology issue
The basic principle of a budget is to keep a note of your income and expenses. However, if you really want to make a proper budget that is immaculate and productive, you will need to look much beyond the basics.
It is seen that most of the people avert budgeting because they are not very clear about the terminology. This issue that is deep rooted in language makes them believe that the word “budget” has several negative connotations much like the word “diet.” They think that both budget and diet are just restrictive reminders that tell about the things they cannot do or have. This linguistic nonsense kills the beauty of budgeting altogether.
Ideally, a budget and a diet are both effective tools which when only used properly will lead to the desired outcome. Using a diet will help you to develop a healthy body and using a budget will help you to develop an economically sound and responsible lifestyle.
Therefore, realizing the necessity of it few people even go a step further and drop the word ‘budget.’ It makes them feel better about the process when they call it a ‘spending plan.’ Since a plan is not as restrictive a term as budget, you can now view things from a different angle. Instead of considering the things you cannot buy, consider those you can buy. This will make you feel better knowing about your purchasing power and help you to know how you can spend your available money, which is the primary purpose of a budget.
Tips to budget well
You can consult with an expert advisor or even take cues from the blogs and articles on budgeting published in different sites such as libertylending.com or others. You will find that the most common steps to follow for budgeting are as follows:
You must start with your bills. This will let you know your income but instead of focusing on whether it is enough for you, focus on your monthly spending. This will let you know where your money goes. It must include fixed expenses such as the following:
- Mortgage payments
- Insurance and
Once you have noted the fixed expenses it is time to take a note of the variables such as the following:
- Pet care
- Gym membership
- Entertainment and
A significant part of taking control of your money is to exercise some chastisement in your spending habits.
Income should be larger than the output to make a budget effective. Therefore, just like your expense you must also look at your income. Compare it with the amount that you are spending. If it is less it will lead to personal savings. If it is more you will need to create a personal savings plan. That means you should not spend everything that you earn. In such situations, you have two choices. You can increase your income or cut down your expenses. Strategies to increase your income include:
- Getting a new and higher paying job
- Getting a second job and
- Finding a roommate to help you.
Strategies to cut your expenses include:
- Eliminating impulse buying
- Cutting out unnecessary expenses and
- Using cash only to make a purchase.
You will need to accept the reality which is you can bring in specific amount of money each month and once you spend it, it is gone forever. Spending any money that you actually do not have can prove to be incredibly expensive.
Fortunately, it is not at all difficult to get your finances back on track. Budging will help you a lot in the process. This is the beauty of budgeting. You will find a large number of software programs and spreadsheets specially designed to make your budgeting process faster and easier but still you will need is a piece of paper, a pencil and most importantly a strong desire to live within and even better below your financial means. It is only your desire that will save you from relying too much on your credit cards in the times of emergencies or should you lose your job.
Therefore, despite the negative connotations, a budget is the most useful tool that can put your personal finances back on the right track and eventually reach your financial goals.