Budgeting Basics

Remember all that basic math they tried to teach you in school? Well, personal budgeting is one of several practical, real-life uses for those skills. Because unless you're Bill Gates, Donald Trump or some other multi-million or billionaire, you're going to need to pay attention to how much you makes versus how much you owe. And even if you are in a fairly comfortable financial position where you can afford to hire an accountant, it is still a good idea to keep track of those numbers on your own as well.

The first step is so simple that it's easy to ignore - get out a blank piece of paper, a pen or pencil and a copy of your paycheck. Next, write at the top of the page how much your take-home pay comes to. Why bother, you might ask. You already know how much you get each month, so why write it down? Because without it the remaining steps are rather pointless. And you do want to figure out why there's no money at the end of the month, right?

Now get out all of your billing statements for the month. Mortgage or rent, car payment and auto insurance, electricity, gas both home heating and for the car's tank, water bill, etc. All the important stuff. These go at the top of the list. Without them you're homeless or nearly as bad off, so make sure they get taken care of first. Now deduct all these costs from the net paycheck amount. Sounds simple and I'm sure you may do this in your head each month, but trust me when I say that writing it all down will give you an even clearer idea of where it all goes. And this is only the first chunk.

Next, if you have any credit cards, get those statements out. These are going to be the worst offenders of your frittering' budget. Hold onto those for a moment because although they may be big dogs taking a huge bite from your budget, they are only the beginning.

Next, you will also need to gather all other receipts from the previous month and I mean every receipt. That latte and bagel you grab every morning? Maybe its just an energy bar and drink? Darn right. Add each day's breakfast, lunch, snacks and dinner tabs into a total for the month. And you're not done yet also add morning paper, monthly magazines, personal hygiene and other non-food items. Thirty days times whatever each little nickel and dime's worth of each item comes to quite a sum, isn't it?

That amount all by itself is most likely a shock. For most folks, this total is likely to not only outshine the credit debt, but the monthly food budget for one person alone can come to as much as your vehicle costs or all your utilities combined. Add extras like periodical subscriptions along with necessities like toothpaste and soap that you purchase on a regular basis, let alone whatever perks or toys, like new tools, make-up or a night out to the movies every weekend and no wonder the paycheck isn't big enough!

Now, first thought here is to eliminate the extras, right? Maybe you can live on regular coffee instead of Starbuck's. Maybe you could fix meals at home more often and eat out less. Well, yes, these are good budget savers and are definitely recommended. However, it is also important to allow yourself a small piece of your monthly budget for fun. Instead of a calling a complete stop to going out every weekend, maybe you can still go out at least once or twice a month. Do what you can to find new activities to replace the more expensive ones. Because just like any other diet, reducing budget woes can end in disaster if you don't allow yourself a chance to splurge a little from time to time.

In other words, along with the important and essential costs you should also budget a certain amount for entertainment. If you don't, you'll likely find yourself spending anyway and blowing your hard work out of the water. All work and no play, after all. Enjoying life is just as essential as taking care of all the practical stuff. Trying to cut out fun simply doesn't work in the long run, health wise nor budget wise, so plan for some frivolous things along the way. Just do what you can to stick to the amount allotted.

It is also important to allow a certain leeway or emergency fund, too. This is an amount not designated for anything in particular, but almost always comes in handy for unexpected expenses like an emergency room visit co-pay or car repair or other unforeseen incident. Because no matter how careful you try to be, life will always have those curve balls waiting for you.

A good way to build this fund is to set up a separate savings or checking account from your regular billing and have a small amount say $50.00 or so that goes into it each month. Do not allow yourself to touch this money unless it is for an emergency! If worse comes to worse and you know you have the monetary control of a drunken sailor, ask someone you trust to hold this special fund in their name on your behalf. Trust funds are everyone's friends.

And lastly, keep going over those numbers every month. Gather your bills and receipts and write down how much each comes to. Place your net pay at the top and start subtracting. Make sure to give yourself leeway for daily expenses like food and a cushion amount that is not attached to any particular expense. And stick with it! Eventually, you'll see patterns in your spending and can figure out ways to handle them better. In the long run you'll find peace of mind, too, as you find ways to bring it under control.