Your 5-minute guide to budgeting

March 29, 2009 at 10:06 am Leave a comment

‘Budget’ is not a four-letter word, but many people avoid it like one. These 20 tips can help you face up to your finances and achieve your monetary goals.

By MSN Money staff

 

Budgeting isn’t a punishment for not being born wealthy.

 

It’s an avenue to know where your money goes and help you reach your financial goals, whether it’s a new home, a comfortable retirement or just making it to your next paycheck. (See the video “Budget your way to smarter spending.”)

 

When all is said and done, you simply can’t spend more than you make, at least not for long. (See “Money trouble? It’s your own fault.”)

 

What’s going out?

 

The first step is figuring out where your money goes right now. Use an online worksheet or a plain old notebook to keep track of your spending for a few weeks. Go through your checkbook and credit card statements. Add up the amounts, and you’ll have a good idea about your spending habits. (Take our “Savvy Spending Quiz.”)

 

A few things to consider:

  • Common budget categories include housing (rent or mortgage, homeowner dues), recurring bills (cable, utilities, insurance and credit card minimums), food and entertainment.
  • Let your categories fit your life. You might have expenses for school-related items (tuition and books), pet care or travel. If your hobby is your passion, make it a category.
  • Account for big expenses that occur once or twice a year, such as car insurance.

 

What’s coming in?

 

When your expenses are tallied, go through your pay stubs and calculate your average monthly income. Don’t forget to include interest income, dividends, bonuses and alimony.

Once you know how much you earn and how much you actually spend, decide where and how much you want to spend. Divide by 12, and voilà — you’ve got a monthly budget. Adjust as necessary until your monthly budget equals your monthly income.

Some things to keep in mind:

  • Figure out which of your expenses are wants and which are needs. Actual needs are fairly limited: food, shelter, clothing. Nearly everything else is a want, but even the way we fulfill our needs involves choice. (See “9 money rules to live by.”)
  • Prioritize. Fund your retirement first, no matter what. Put enough in your 401(k) to grab the employer match. Then start tackling your debts.
  • Don’t forget an emergency fund. This will go a long way to keeping you out of debt should the unexpected happen — and it will. If you don’t have funds now, use your income-tax refund or set up a regular electronic transfer from checking to savings. (See “Why you need $500 in the bank” and the video “Everyone needs an emergency fund.”)

 

Take a little off the edges

 

Once you’re on your way, keep track — at first weekly, then monthly — of where you’re going off budget and adjust your allocations.

 

Food, for instance, often goes unchallenged. You might wince at the checkout counter, but you do have to eat. Still, there are ways to cut the food budget without sacrificing quality or quantity. (See “Take a big bite out of grocery bills.”)

 

  • Many stores reduce their products based on a 12-week cycle, so notice when something goes on sale, but don’t buy until it hits the rock-bottom price.
  • Keep a notebook for a while so you get to know the rock-bottom prices on items that you frequently purchase. Keep track of which products are cheaper store by store.

 

Food isn’t the only place for savings. Here are some other ideas for keeping your budget on track:

 

  • Review your habits. Do you need the full-on cable package or caller ID? Do you pay full price at a convenience store for items you could buy for less on your weekly grocery shopping trips? (See “When cheap is a way of life.”)
  • Some people fritter away cash; others use a debit card as if it had unlimited credit. Whichever you might be, consider converting. A debit card devotee is more likely to think twice about spending cash, especially if you leave your ATM card at home.
  • If things still aren’t adding up, look at whether you need to adjust your allocations or change your spending habits. (See “5 steps to fix a broken budget.”)

 

Building the budget habit

 

Successful budgeting takes time and persistence so don’t be discouraged if you don’t hit your monthly goals at first. Here are some ideas to make it easier:

 

  • Write it down. If you don’t, you probably won’t stick to it.
  • When good fortune comes your way in the form of an “extra” paycheck or a bonus, pay an annual premium, make an additional mortgage payment or use it for seasonal extras, such as summer vacation costs or Christmas presents. (See “What to do with ‘extra’ paychecks.”)
  • Get into the habit of thinking ahead. If you know your situation is going to change — a new baby, new winter clothes, a new job — plan for it and try to pay cash.
  • Remember, budgeting is the means, not the end. Keep spending “mistakes” in perspective.
  • As your income climbs, don’t splurge until you’re sure you’re staying ahead of inflation. A good budget grows with you, so it’s worth re-evaluating your budget every year.

 

Published Jan. 4, 2008

 

Entry filed under: From Other Blogs, Learning Curve. Tags: .

Crisis in Trengganu? What crisis? Bunga Yang Cantik Jarang Harum

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Calendar

March 2009
M T W T F S S
« Mar   May »
 1
2345678
9101112131415
16171819202122
23242526272829
3031  

Most Recent Posts


%d bloggers like this: