Wondering Why You're Always Broke? Learning How to Budget Can Show You Where Your Cash is Going, and Help You Get the Most Out or Your Hard-Earned Money!
Broke or Budget?
Don't be intimidated by the "B" word. It's simply an organized way of managing your money. It can be as simple or as complicated as you want. It gives you an overall picture of where your money is coming from, when it's coming from, when it's coming in and how it's being spent. Above all, a budget should be flexible, changing according to your situation.
Budgeting helps you afford your short-term goals like buying clothes, going to the movies, or taking a friend to that trendy new restaurant. It's also for longer-term financial goals like buying a computer or a care, taking a trip, or perhaps foremost on your mind - paying for an education. When you take control of your financial affairs, you're more confident about your future.
Who Should Budget?
Everyone. A budget is key to financial control. It gives you a "snapshot" of where you stand financially and where you're headed. Don't rely on anyone else to do your budgeting - take control of your own finances. Budgeting helps you realize the importance of saving and how challenging it can sometimes be to achieve your own personal goals. You have to start somewhere, so budget to buy that new mountain bike or discman you've been eyeing.
Where do I start?
Before you draw up a budget you need to gather some information. What
are your goals? Which ones are most important to you? Defining and prioritizing your goals is one of the first steps in getting started.
How much money do you have to work with? Use the Budget Reality Check to calculate your available income. Remember your income can come from many sources - wages, tips, babysitting, and yes, your parents. If you earn income irregularly (like only during the summer), you need to average what you earn to get a monthly income. Don't count on overtime pay as regular income. It can't be relied on, so don't include it as income in your budget. Instead, use occasional overtime to help contribute to your goals.
What are your expenses?
Remember that you can only spend wisely by knowing where your money is going. Don't forget that if you're going away to school, you'll probably be responsible for some new living expenses.
Consider the following:
FIXED EXPENSES: The bills you have to pay are roughly the same amount month to month or year to year. They include rent, fees for education, gas for your car, and anything else you pay for on a regular basis.
VARIABLE EXPENSES: These amounts vary from months to month. You have some control over them. They include essentials like food, clothing, utilities, and transportation, and luxuries like long distance telephone, club memberships, vacations, gifts, recreation, pets, and other miscellaneous purchases.
Create your own plan
Make a note of your fixed and variable expenses. Their total should be equal to, or less than, you income.
If you have
too many expenses, think about what you can eliminate without sacrificing your lifestyle.
Be sure to include an emergency fund. Try to build a cushion of three to six months of income to help you prepare for the unexpected, such as sudden car repairs, unforeseen bills, loss of employment or illness. By doing this you'll be prepared financially and can avoid taking on more debt.
Once you have a good estimate of expenses, subtract that figure from your income. The remaining money is for your savings or goals.