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Here's the first thing you should do about your money.
Do you constantly ask 'where does all my money go'? Do you spend on stuff you really don't need? Then, it's time to finally do something about it!
Don't feel bad. You see, most people don't have a budget. In order to save, you must have a clear budget plan. A good way to start is to save 10% of your income.
Do you want to learn to budget? Here's 2 steps:
1. How to determine your budget
2. How to manage your budget.
A. How to determine your budget:
STEP 1: WRITE YOUR INCOME
How? Add up everything you make every month [this includes other jobs, hobbies] Make sure you include monies going to IRA, Christmas account, etc.
STEP 2: WRITE YOUR EXPENSES
How? Write down on a piece of paper every 'fixed' expense. These are amounts that dont' change every month, such as; rent, car insurance, cellular, internet, cable & credit cards. [please don't include personal stuff like haircuts, food, clothing, and entertainment].
STEP 3: WRITE THE DIFFERENCE
How? Simply deduct your income from your expenses. This is money left over from paying your 'fixed' expenses. [again don't include personal stuff].
STEP 4: WRITE YOUR MONTHLY SAVINGS
How? Think about what you'd like to save, every single month. Its the toughest part of this exercise, and you may have to think for several days. Tip: the rule for saving is about 10% of your income [step 1].
STEP 5: WRITE YOUR MONTHLY BUDGET
How? Deduct your monthly savings [step 4] from your difference [step 3]. This new figure is YOUR BUDGET! (you see how easy that was?)
STEP 6: DETERMINE YOUR DAILY BUDGET
How? Divide your monthly budget [step 5] by 30. This new figure is your daily budget - in other words, it's how much you can spend every day.
Congratulations, your daily budget is determined.
But, let's be certain you don't over spend. Let's go to the second part...
B. How to manage your budget:
STEP 1: SET UP A SAVINGS ACCOUNT
Why? You need something that tells you - the balance of your monthly budget. The easiest way is to open up a savings account. [if you already have one, take what's here and put into another account, for now].
STEP 2: ADD TO THE SAVINGS ACCOUNT
Deposit your budget amount from step 5. How much? example: if today is calendar day 1 (March 1st), add the total amount. However, if today is calendar day 15 (March 15th), add only 50% of the amount. This way you'll know exactly what's left from your monthly budget ... get it?
STEP 3: MONITOR YOUR SPENDING
How? Check your savings balance every 2-3 days to make sure you haven't overspent. [tip: set it up electronically so you can log on its website & check the balance].
Example: Let's say it's day 3 of the month. At this point, you should have spent only 3 times the daily budget. So if your daily budget is $30, you should have spent only $90, okay?
STEP 4: WHAT ABOUT YOUR PERSONAL EXPENSES?
Haircuts, shampoo, manicures, clothing, gas, entertainment, etc. are your personal expenses. THEY ARE PART OF YOUR DAILY BUDGET. You must accept this to successfully budget yourself. So keep monitoring your balance - and watch for these expenses.
Tell us what you think?
Has this plan helped you control your expenses? Do you have a different plan - or a more simple version?