Debt Education

Your Budgeting Plan

Setting up a spending plan is crucial. And it isn’t difficult to do. If you begin by listing all of your sources of income – such as salary, pension payouts, dividends, gifts and even tax refunds – and becoming aware of when that income is available, you start to see exactly what you have to spend each month.

In an opposite column, you will want to list every monthly expense you can think of. And you can make two lists for expenses: one list of things which must be paid monthly and on time, which we will call inflexible, and another which can be referred to as flexible. Fixed payments are things like rent, mortgage, insurance premiums, car payments and tuitions. Flexible payments are things that you have more control over the amount spent. These are items like groceries, entertainment and clothing.

Expenses Versus Income

When your expenses are totaled, subtract that total from your total income number for the month. You may want to even sub-divide your income based on how often you get paid or how often other forms of income arrive. What you want to do is determine how much of your income must be set aside each month for maintaining your known expenses.

Should your expenses total up to a figure larger than your income, you will know right away that a financial change is necessary. It is easier to look at these numbers and begin a plan of cutting back in order to get your income versus expenses back on track.
The alternative is to borrow money each month in order to keep going, and the interest rates alone on this type of budgeting can be deadly.

It is a good idea to set up a separate bank account, where you keep a reserve for fluctuations in flexible income and expenses. By doing this, one can avoid getting into a paycheck to paycheck situation which can be dangerous if there are unforeseen expenses. Learn to leave this account alone unless it is absolutely necessary.

The Importance of Financial Goals

One of the primary reasons to make budgets is to learn how to achieve financial goals. They are an excellent first step toward the discipline that is required to maintain a healthy financial status.

Those who are deeply in debt are sometimes those who have never budgeted and are unaware of how they spend their money. Setting a financial goal necessitates adjustments in lifestyle and perhaps making other changes. There can be one goal or a number of them and setting both short and long term goals can be helpful.

Types of goals:

The short-term financial goal is one that is set for one month or even one year. Beyond keeping monthly expenses in check, it is also the place to plan for vacations, large purchases or paying off credit cards.

Mid-term financial goals extend your goal to one to five years. This is a very good category for budgeting for a new car, remodeling a home or paying off all credit card balances.

Long-term financial goals are for the big events in a financial life. This type goal is one you use for buying a home, insuring your child’s college education or putting away enough to have a retirement fund.

Wise Ideas For Achieving Financial Goals

It will help to seek out and learn tips on budgeting and financial goals. Often, the idea will sound like mere common sense but it is always good to have reminders.

  • Keep written files on all of your budget goals. From short-term to long-term have them separated and in their own place.
  • Give yourself specific end dates for your goals.
  • Make your goals realistic and within your reach.
  • Know you will make adjustments. There is no rule that says a strategy cannot be rethought.
  • Read your goal lists frequently. Not only can your check your progress but they will be cheerleaders for sticking to plans.
  • Vow to stick with the goals you set.

Learning To Spend Wisely

Sticking to a budget usually means changing spending habits, and there are many ways to do just that. Stop any impulse spending.  Think about purchases and even make a 30 day rule to not make purchases without thinking about them for a month. Give yourself time to comparison shop and make an impulse list. Don’t have multiple items on the list either.

  • From grocery shopping to major purchases, vow to comparison shop.
  • Don’t buy anything you can’t pay cash for.
  • Become knowledgable about advertising offers, possible scams and gyps.
  • Review your written budgets often and see how you are doing with your progress.
  • Read labels and know what products you are buying. This includes grocery and household things as well as bigger purchases. Understand what you are spending on.
  • Shop alone. Don’t allow shopping to be a social activity.
  • Don’t fall for brands. Understand white label products and the cost differences.
  • Don’t get cash back when shopping for groceries with a debit card or writing a check.
  • Take a serious attitude about money and how you spend it.
  • Keep good records. All the time.

Techniques For Better Budgeting

While working to stick with your budget, it is also a good time to develop what can be long term and successful techniques for maintaining your budgets.

    These can become practices that last a lifetime.
  • Never buy things on impulse whether it is a pack of gum or an expensive electronics item
  • Make notes on how you spend your money and when you make poor choices
  • Give yourself mini-goals within your budget. Vow to cut down on food purchases that might not be needed or curtail your entertainment spending.
  • Don’t borrow money and don’t use credit cards
  • Save your receipts from shopping. Look at them later and make notes on how you could save money on the purchase
  • Learn to watch for and wait for sales.
  • Save your pocket change and save a small amount each day whether it is a dollar or ten
  • You can find a less expensive substitute or alternative to nearly anything you need to buy. Find them if you aren’t meeting your budget.
  • Don’t carry your credit cards, a lot of cash or your checkbook when you go shopping. Take the temptation away.
  • Comparison shop online and look for free shipping.
  • Learn how to do things for yourself. In all of our lives, there are things we pay others to do that we could do for ourselves.

Rules To Live By

  • Keep spending to an amount less than your income.
  • Start a savings plan and take advantage of interest rates.
  • Don’t accept every offer of a credit card.
  • Pay your debts. Honor your commitments.
  • Learn to project your yearly income and know when it varies.
  • Think of the future.
  • Keep good tax records.
  • Learn about good plans for investing.
  • Allow yourself a better financial education for the future.
  • Stick to your plan!