What Is A Budget Simply put, a budget is a spending plan. It details how much you earn, how much you spend, and how much is left over. If you have any money left over, then you have a budget surplus. If you don’t, you have a budget deficit. If you happen to fall into the budget deficit category, then you have to cut non-essential purchases completely out of your budget. Generally, living and leisure expenses can be modified slightly to fix the problem.
Why Start A Budget
Statistics show that the average American spends 10% more than they earn. This means that if you have an annual household income of $50,000, then on average you would be spending $5000 more than you earn. The only way to combat this cycle of overspending is by establishing a realistic household budget and stick to it.
What Are The Benefits of Budget
Maintaining a budget allows both individuals and families to become debt free, save money, track spending patterns, and achieve financial goals. Whether you are looking to pay for your next car in cash or funding your child’s college education, establishing a budget is a sure way of doing it.
Why Some People Fail at Budgeting
Many people fail to live within their budget when they feel that it is too restrictive or too difficult to manage. Therefore, it is a good idea to allow room for leisure entertainment and some discretionary spending. This way, you stick with your budget and it becomes a habit without feeling miserly.
How To Start A Budget
Follow these quick and easy steps and you are well on your way to becoming a master at budgeting.
1. Set your goals. Why do you need to budget? Saving for a new car, vacation, or nest egg?
2. Determine your cash flow. How much is coming in every week, month, year? Write it down, or enter your information into a budgeting software program, such as Budget Forecaster by Strativia.
3. Determine your expenses. Where is your money going? Again, write it down.
4. What the verdict? Do you have a budget surplus or budget deficit?
5. Maintain or modify your plan. Depending on your results, you should either stay the course, or change your course to achieve your financial goals.
There you have, Budgeting 101. It’s not hard. The difficult part of budgeting is actually starting and sticking to it. If you start today, you will be financially free tomorrow.