Building a budget that works for your family
A good budget is the number one tool to helping a person pay off debt, build their retirement accounts, and plan for their financial future. A budget is a road map to help you with your everyday finances. A person should not look at a budget as being a negative item, but a helpful tool. When you take a vacation you use a road map or google maps in order to map your way from point “A” to point “B”, well a budget is the same thing, a map to help you manage your finances.
Many Americans have troubles with their bank accounts and other finances because many of us lack the skills to manage their accounts and their debt. There are many tools out there to help us with skills but most people do not know where to look or what to look for. Many financial tools are free of charge if you know where to look.
Before putting together a budget the first thing you need to do is track all your expenses for a month. There are mobile apps that can help you record all of your purchases. Every purchase, from small ones to large ones need to be recorded for this month. Even ATM fee’s and bank fees need to be recorded in order to get a good picture of you spending habits.
Take this data after a month of tracking and sit down and you will probably be surprised to see where your money has gone. This is best way to get an overall picture about how you allocate your funds and spend your hard earned money..
When you finally sit down to put together your first month’s budget the number one thing you do not want to do is cut out all the fun things you do. Don’t make this a punishment and take all the fun out of your life. If you are too strict on yourself you will probably fail in a short time period. You will find yourself cheating and eventually you will stop following your budget and you find yourself back in the same boat your are trying to leave. Instead learn to limit yourself. Example would be, “if you stop every morning for a starbucks coffee or eat out for lunch everyday, don’t stop doing these things you enjoy all together. Just set yourself some limits, instead of doing these things daily, cut yourself back to once or twice a week, you will see the benefits add up in your wallet at the end of the month.
Now take your bills for the month and separate them into categories. The first category should be your fixed expenses, such as your mortgage or rent, your utilities, car payment and any sort of membership fees that you pay monthly. Hopefully this does not go over fifty percent of your monthly take home pay.
The next category would be savings. Experts recommend putting away ten to twenty percent of your take home pay into a auto deposit savings account that earns interest. They recommend an auto deposit, this is where the money comes out of your check before you notice it is missing so these funds will not be seen, “out of sight out of mind” kind of thinking.
The third category would be flexible spending. Your monthly budget should not exceed thirty percent of your take home pay for this category. This would consist of eating out, morning Starbucks coffee runs, groceries, gas, entertainment, hobbies, and etc. This category is called flexible because these items can be adjusted. For example, when shopping for groceries, try cutting coupons and look at adds in the paper to save yourself some money. Shopping for clothes, is another area that you can compare prices in order to save money. Filling the car with gas, shop around the area for cheaper prices for fuel. Cut back to once or twice a week for going to Starbucks instead of going daily. These are just a few examples of where you can be flexible and save money.
So if you see, fifty percent of your money goes toward your large ticket items like rent or mortgage, twenty percent goes to savings of some kind, and thirty percent goes toward your more flexible items.
Here is a list of tools to help you build your budget. These tools are online so I have put the links here for you to click on.