How Budgeting Your Monthly Income Can Keep You Out of Debt

We've all heard the phrase "too much month at the end of the money." Unfortunately, it wasn't the month that puts people in that situation, it's the individual that didn't properly budget his or her income throughout the month

A lot of people, at the beginning of the month feel like they just got all the bills paid off for this month so the next paycheck is freebie to purchase more want's than need's. What happens is at the end of the month when all of the bills are still there on the desk, is a financial circus. Bills are juggled around to figure out how cover them all but they get paid and the process is started all over again.

There is some great computer software that can be purchased that will keep you on the straight and narrow when it comes to budgeting your money from month to month, but it really isn't all that hard with a pad of paper and a pen.

One of the best things you can do with your paycheck is to enroll in direct deposit if your employer offers it. When you enroll your checking account to direct deposit, open a savings account with your bank and add that too your direct deposit as well. Have your employer deposit 10% of your pay into the savings account and the remainder in your checking account. Then just forget you even have a savings account. It won't take long and that money will start earning interest for nothing more than sitting in an account you've forgotten even existed. The more that is deposited in the account, the more interest you'll be earning. It's free money, why not take advantage of it.

The other 90% needs to be budgeted for the rest of the month to not only cover all of the monthly bills by also your weekly expenses as well, groceries, gas and any personal habits you might have. This is where you have to sit down and use that pen and pad of paper you have on hand.

First, have all of the monthly bills in front of you. Add them all up and divide by the number of paychecks there are in that particular month. Subtract that number by your average weekly income and get ready to do some more math.

Next, estimate the average amount of weekly expenses you acquire such as gas for your car, food to eat and personal items you'll need from week to week. Always over estimate this figure to be on the safe side. Subtract that number from what was left over after having paid the weekly average of your monthly bills. Do you still have a positive number? If you do, that is what you have to spend on luxury items you might desire from week to week. If you are too close to a negative number, there are two things you can do. Either get some training and find a better paying job, or reexamine your weekly expenses to find items that were listed in the wrong place. It's probably easier to consider the latter for the short term fix to your personal finance situation, although there is nothing wrong with learning new skills to increase your income.

The focus to this project is to find your need's and want's and list them in two different categories. Determining which is which seems like the hard part but it really isn't. Needs are the very basic necessities of life. You have to have food and your car will need gas to get to work. There are certain household needs that have to be added into this category as well, the items that are bought each week to keep your household running, like light bulbs, trash bags and such. Fill up your needs list first and anything that's left over belong in the want's list.

Once you have the bills divided into the number of paychecks and the need's list subtracted from the remainder, it's then you can focus on getting some of the want's list. If you don't have enough money left over to get all of the want's, you'll have to figure out a way to live without it.

Budgeting your payroll to these three different categories will simplify your weekly expenses. If you commit to staying on this budget, over a period of time you will see that some of the want's you had to give up may start returning to that list. And every once in awhile, consider that savings account your remembering to forget and you might get a better nights sleep not worrying about how your going to pay the rent when it's already budgeted in.

Sources:

*Steve Tucker,"How to Budget Your Monthly Salary", Associated Content