Budget on Any Income

Whether you make $12,000 a year or $150,000 a year, you will not survive without a budget. Some of you may be thinking I would be rich if I made $150,000 a year, all my problems would end. Reality is without a plan for your money, as your income increases so do your expenses. Ask anyone in that situation. Your budget or financial plan if you prefer, details out where your money is going. How many people have said, a budget restricts how I spend my money, I earn it so I should be able to spend it the way I want. If you want control of your money, then you must create and stick to a budget. Instead of your hard earned money disappearing and not knowing where it went, your budget will tell your money where it needs to go.

Deciding where your money needs to go can be the tricky part. The internet is filled with various websites dedicated to helping you create a budget. Some of the budgets on the internet are several pages long, and almost demand a dollar amount in each column. Fortunately, a budget doesn't have to be that difficult. Every household needs to know what bills are due each month, bills due annually and bills that are due sporadically. Most monthly bills will include the basics, housing, utilities, car payments, etc. Other types of bills may be paid less often such as car insurance, homeowners insurance, property tax, etc. You family may have different items than other families, but knowing what they are, how much they will be, and when they need to be paid is important to your financial health.

In your budget, whether you use a fancy computer program or a piece of paper, you will need to create categories. Each category should include all bills whether they are paid monthly or not. You will need to assign a dollar amount to each bill. That is easy for fixed monthly expenses, but can be tricky for varying amounts. You may need to do a little research to determine how much each bill averages each month. If you spend $150 on electricity each summer month, but only $50 during the winter, write down each amount and total them up. Then divide that number by 12, giving you an amount that you need to put into your budget each month. By doing so, even during the times when your bill is low, the money you put into that category will be used to cover the higher bill months without putting strain on your budget during those months. You know it's easier to pay a bill when you have the money for it!

Now that you have added all the bills in your budget, you will need to add the other categories. These may include food, clothing, entertainment, vacation, gas, subscriptions, tuition, etc. Take a real look at what you are spending in these areas and make sure all areas are covered. Forgetting you pay for satellite radio every three months will hurt your budget on the month it is due if you haven't budgeted for it before. After including all categories you believe fit your lifestyle, add it up. Take your income and subtract your expenses. If you come out in the black (income left after expenses) you either forgot something in your budget, didn't give realistic dollar amounts, or you really are doing great. Most likely you will end up in the red with a negative number. This negative number may explain why your credit card balance is rising, but your savings is reducing. This is when you need to make changes.

Take a look at your budget. Where's you money going? It could be as simple as lowering your everyday expenditures. There is a term called the latte factor. It simply means that most people have one item that they splurge on most of the time without realizing it. It could be that you buy a coffee (latte factor!) everyday. Assuming your coffee costs $4 and you buy 5 a week, you are spending $20 a week on coffee alone. If you were to make your own, you can get a nice bag of coffee for $8 that will last two weeks. You just saved $32. Buy a cheaper brand and you save even more. Do you eat out several times a week? Cut it down to once or twice and you will see a drastic reduction in your dining out budget. If you go to movies every week, cut it down to once or twice a month and you just saved yourself $40 or more. Find your latte factor and set a goal to reduce that cost. Cutting it out completely may actually cause more harm, as you will then feel deprived and end up throwing your budget out. Just reduce the cost and you will have more control of your budget and a greater chance of sticking with it.

Since cutting back on your latte factor, how is your budget now? The goal should be to have everything paid for with cash and not using credit cards. Once that happens, you need to start stashing cash away into savings. Whether you are able to put away $5 a month of $500, every amount helps. The key is to not touch it once it is in there! That savings is for emergencies only, and no a sale on shoes does not qualify an emergency! When you have a savings account, the stressed feeling eases. If you know that there is money to cover a small disaster, it is easier to sleep and worry less. You can then focus on paying down your debt which will relieve even more stress.

Paying down your debt and building your savings may take a while. But can you jump start that process? Look around your house. Do you have "stuff"? Stuff you don't use, don't really want, or just don't need anymore can be sold for money to put into your savings or debt payoff. Have a yard sale, put your items on an online auction site, and sell them at consignment shops, anything to de-clutter your house all while earning some money. This money should not be spent on anything but debt or savings. It is not "free" money. It is money that you NEED to help secure your financial future and reduce your stress. Yes yard sales are tedious and most people don't make much money. However, you are going to scrutinize your house for every item you can live without. You will have a massive yard sale and you will even ask family members and friends for their stuff. By doing so, you could end up with several hundred dollars. Besides, anything is better than what you had before, right?

You have been busy. You have created a budget, cut back your latte factor, started a savings account, sold needless items, and now you can take a month to work on these things to strengthen your budget. You can take the time to determine the style of budget that works for you. Talk to others about your goals for your budget. Whether it is to be able to pay the bills when they are do, or to have a savings account overflowing, talking about your goals with others will make it easier to commit to. If you have friends in similar situations create a club where you are open and honest about reaching your goals. Share the excitement with others, and you will be more likely to succeed. With each accomplishment, your excitement will grow and your stress will lessen. That is the ultimate goal - less stress and financial freedom.