Budget Planning
Who
needs a budget?
Budgets
are often viewed as necessary for those who are financially burdened or for the
poor. However, budgets can and should be used by everyone, regardless of age or
financial status.
What
is a budget?
A
budget is simply a tool that is used to plan spending and savings. You can think
of it as a roadmap to navigating your finances. You wouldn’t even think of
driving cross-country without first knowing which highways to take, so why do
people think that they can just ‘wing’ their spending and expect to end at
their desired destination?
Why
do I need a budget?
Most
people are ignorant of their spending habits—they simply know that the money
is gone at the end of the month but rarely have an idea of where it went. A
planned, well thought-out budget can not only help you identify potentially
problem areas, but also help you plan for unexpected emergencies.
How
do I create a budget?
A
successful budget needs to have categories for all major expenses such as:
Housing, Automotive, Debts, Clothing, Food, etc. Each of these categories should
then be broken into sub-categories. For example, Housing can be divided to
include Rent/Mortgage, Maintenance, Electricity, Gas, etc. These are then added
to show the total Housing requirements.
Categories
should also be set up for miscellaneous expenses that you typically don’t
think about: The morning coffee and donut, daily newspaper, or that bottle cap
collection that always has you looking for that elusive rarity. All of these
need to be taken into account and planned for.
When
you are planning your budget it is helpful to be aware of your spending history
for each category, such as, knowing what your utilities typically run for in an
average month. Knowing what you have
to spend each month is half the battle; the other half is knowing what you
can
spend on the other items.
Be sure to also read our new article
How to set up a budget --and stick to
it!
Please visit our sponsor
page if you are interested in learning more about Budget Help.
