When it comes to money, do you feel like you're always coming up short? Well, you're not alone. Only half of Americans say they could cobble together $2,000 if an unexpected expense occurred in the next month, according to a March 2013 survey by the Employee Benefit Research Institute.
That's reason enough to get on the budget bandwagon.
To help you jump on, here's a three-step process for building your own saving and spending plan. Follow along and you just might find some much needed relief.
In its most basic form, a budget is a comprehensive list of income and expenses. Before you can do anything else, you need to figure out what comes in and what goes out. Do this by looking at your paystubs, bills, bank statements or just an online printout from your checking account and then start crunching the numbers.Income is fairly straightforward: wages, salary, net sales proceeds, investment income, and pensions or other fixed retirement income. I've found that the most helpful way to divide your expenses is to use three categories.
So now comes the question: Where does your money go? Have recent changes caused expenses to gain the upper hand in your monthly life? And have your saving goals taken a back seat? This exercise should reveal opportunities to trim back or cut out.
This is the hard part and there should be no sacred cows. The goal is to find room within your budget to accomplish what you need to get done. This could be as simple as surviving during a difficult stretch without creating a bunch of debt.
Or, it might mean freeing up cash to begin or build upon your savings and investment program with the intent of securing your future.
Your analysis and commitment to making changes has yielded the information you need to map out a new normal. A targeted and detailed list of planned income and expenditures will enable you to hold yourself accountable and save for the future.
Congratulations, for starting on the path to create a budget! Keeping it going may not always be easy, but it's a first, important step toward getting a handle on things during difficult times.
This morning, my kids asked me about how I became interested in money. There are a couple of reasons, but we got talking about my job in mortgage banking and how I worked with delinquent borrowers and that I got to review the original underwriting on those mortgages, and that I saw a lot of […]