| 'Budget' is a four-letter word when it comes to your | | | | but which don't have predetermined dollar amounts: |
| personal finances, but face it--if you don't decide | | | | food, groceries, utilities, basic business wardrobe items, |
| ahead of time what's most important to you, it's easier | | | | long distance phone calls, commuting expenses |
| than pie to slip into that nearly-impossible-to-break habit | | | | (gasoline and car maintenance, train fare, car pool |
| of living bigger than your paycheck. Use these tips to | | | | fees), basic furniture and household items (remember: |
| get started on creating a roadmap toward your | | | | basic, not luxury), and so on. |
| financial success! | | | | -- Guess what each item might cost per month. If |
| Before you can set a budget, or spending plan, that | | | | you're not very accurate with your estimating, guess |
| you can live with, you need to look at where you're | | | | on the high side so you won't end up with an |
| starting. Are you already 'out in the real world' living on | | | | unpleasant surprise after the very first month on your |
| your own, or are you still living at home or on campus? | | | | budget. If you've never lived on your own and can't |
| If you're already living on your own, you have a | | | | even make an educated guess, ask friends or your |
| headstart in the sense that you know what the costs | | | | parents what a reasonable figure would be. |
| for a variety of things are. On the other hand, if you | | | | -- In the Wants column, enter things you would like to |
| realize that you're already living in a way that will | | | | have: going to the movies once a week or buying |
| sabotage your financial future, it's going to be rough | | | | DVDs; non-business ('play') clothes; vacations; |
| getting things back on track. But it can be done. | | | | cigarettes (nope, they're not needs!); a new stereo or |
| Before you start developing your spending plan, you'll | | | | tv; tennis lessons; a downpayment on a condo or |
| need to track your current spending patterns. For an | | | | house of your own some day...whatever they may be. |
| entire month--it's a long time, but well worth it--carry a | | | | -- Add up each of the three columns. Then check all |
| small notebook with you and record every penny you | | | | your expense numbers, make sure every item is in the |
| spend (yes, every penny!). Write down what you | | | | proper column, and do the math again. |
| spent money on, how you paid for it (cash, credit card, | | | | -- If your Knowns are more than your monthly |
| check), and assign it to a category. | | | | take-home pay...gulp...you've got some major league |
| Each person's spending categories will vary a bit, but | | | | lifestyle changes to make. Double-check your amounts |
| include things like home (rent, electricity, water, renter's | | | | and be sure each item is in the proper column. Once |
| insurance), auto (loan payment, gas, insurance, | | | | you're satisfied that your numbers are right, start at the |
| maintenance, personal property tax), food (for at | | | | top of the column and figure out where you can start |
| home, plus another category for eating out), grocery | | | | cutting back. Home expenses usually make up the |
| items, clothing, entertainment (movies, magazine | | | | biggest category. Maybe taking in a roommate or |
| subscriptions), health (doctor bills or copays, | | | | even moving back home will do the trick. Is your car |
| prescriptions, insurance premiums, contact lens | | | | payment outrageous? It'll hurt, but consider getting rid |
| supplies), and miscellaneous (haircuts, impulse buys). If | | | | of that shiny new car (and the loan that goes with it) |
| you're not out on your own yet, you won't have as | | | | and take the bus or get a smaller, basic, used car, or |
| many categories as someone who is, but it's still an | | | | even a motorcycle. It's better to take a loss on the |
| extremely valuable exercise. | | | | new car now than let it drag you down for years to |
| At the end of the month, you will probably be | | | | come, keeping you from your dreams. Dipping into, or |
| astonished at what you spent your hard-earned | | | | eliminating, Savings is not an option! |
| money on. Most people are. Those 'little' purchases, | | | | -- If your take-home pay covers your Knowns but not |
| usually made with spare change, add up to much more | | | | quite all of your Needs, you'll need to take a closer look |
| than you could ever have imagined. How many times | | | | at those items you listed as needs. Do you really need |
| did you stop at Starbucks? In my opinion, the two most | | | | call waiting on your home phone? Do you really need a |
| dangerous words in finances are 'just' and 'only.' "It only | | | | home phone at all? Maybe just a cell phone will cover |
| cost two-fifty." "It's just four bucks." Add a bunch of | | | | you. Are you spending more than about $50 a week |
| those together over the course of a month, or year, | | | | on food and groceries? Is DSL a requirement, or can |
| and they add up to a big bite out of your budget. | | | | you deal with a dial-up connection, or (even cheaper) |
| After you pick your jaw up off the floor, you'll be | | | | can you stop at the library after work to do your |
| ready to move on to the next step and begin | | | | surfing? Remember...keep your fingers out of that |
| developing a reasonable spending plan that will move | | | | Savings account! |
| you toward your financial goals. | | | | -- If you've got your Knowns and Needs well covered |
| You're Ready--Develop Your Spending Plan | | | | and have some money left over, you can take |
| -- Get out some paper, or use a spreadsheet, and | | | | another look at your Wants list and prioritize it. |
| label three columns: Knowns, Needs, and Wants. | | | | Rearrange the list with the most desirable item at the |
| -- In the Knowns column, record all expenses you | | | | top and those least important to you at the bottom. |
| know you will be incurring and which have a set dollar | | | | Then you can start spending that extra money on the |
| amount each month, such as rent, car and student loan | | | | items at the top of the list and work your way down |
| payments, insurance, basic phone charges (just the | | | | until it runs out. Do I need to say it again? Savings stay |
| cost of having the line, not any long distance calls you | | | | put! |
| might make), Internet access (like AOL or a DSL line), | | | | Don't end up like most people, with no clue why they |
| etc. Enter an amount equal to 10% of your takehome | | | | have no money left over at the end of the month and |
| pay under Savings--this should not be an optional item, | | | | no idea how to get ahead. With your spending plan as |
| but a required one. | | | | your road map, you can travel through your financial |
| -- In the Needs column, record all the things you need | | | | life with confidence and no regrets along the way. |