Financial Budgeting
Once someone has the desire for retirement planning instilled in them, they usually com up against a second barrier. It is difficult to manage your income and spending in a way that leaves an excess to throw into savings. The absolute key is actually simple. Learn to budget the right way. How?
An incredibly powerful financial budgeting tool is already on most people’s PC. It is Microsoft Excel. If you do not have Microsoft Office, you can download Open Office for free which has many of the same functions as Excel. Learn just a few basic functions on one of these tools and you have your start.
The first step in a good budget is to subtract all your regular expenses from your income. These expenses would include expenses such as rent/mortgage, any car notes and insurance, approximated gas and grocery bills, and any other recurring expense. It is very helpful to break this out by pay period. For example: if you get paid on the 1st and the 15th, you have two pay periods. You should form your budget around those two periods, and all income and expenses should be applied in their proper pay period. By doing this, you will be able to better arrange your bill payment so that you aren’t scratching thebottom of your bank account before your next check comes in. If you see that you are streched too thin during one of your pay periods, you should talk to your lenders and utility companies to see about moving your due date. Usually they will work with you if you explain that by doing this you will be in a better position to pay your bills on time.
After you subtract all recurring bills, you should have a reasonable excess. If you don’t then you are definitely living outside your means. If this is the case, you need to cut expenses that aren’t necesarry. Eating out is a huge one that people spend a ton of money on and don’t even realize how much it hurts their pocket book. That is at least until the end of the month when you have nothing in the bank and you are left wondering where your money went. So cut that first. You can’t get out of a restaurant for under $20 with a spouse, and if I had kids, then I would go out to eat about once a year. You can have a much nicer dinner at home by investing in a cook book, and you won’t spend but a fraction of the alternative.
What you do with the excess money after you pay your bills and subtract expenses is really the important part. It’s what makes all the difference. Remembering that entertainment is a necesity, you should also realize that it is a dish best served in moderation. Each person can choose for themselves, but I would feel irresponsible if I spent more on recreation each month than I put into savings. So choose a nummber that you are comfortable with and have that amount automatically drafted into your savings account on the same day you get paid. This step is crucial. It removes the money from your checking account before you have time to justify wasting it on something else. This way you can garantee that it is done every month and you have one less thing to worry abobut for that month.
That’s all you need to get started. Give financial budgeting it’s porper prioriy as a crucial part of planningg for your future.