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Building a Better Budget

So why haven’t you started building your budget?

I’ve found out that most people won’t start a budget simply because of FEAR! People fear what they don’t know or what they don’t want to know. If you are finding yourself stuck in the pay check to pay check cycle or always saying you’re broke, it’s time to create a budget and find out exactly what your money is tied up in. We all have dealt with FEAR in some area of our life whether it is trying to be physically fit, starting a new job, or trying out a new business venture. We all want to know one thing…will it work? We are scared of failure, and we’ll make up all types of excuses as to why it won’t work and before you know it you have talked yourself out of something great. I know it to be true because I did the same thing while trying to start this blog.

Another reason why you may fear creating a budget is because it forces you to take responsibility and become disciplined. At that point you become a conscious spender and you start thinking about everything you buy and spend your money on. You’ll start thinking twice about even buying a soda out of the vending machine every day at work because that $1.50 starts to add up, and you start to realize that your budget allows you to only get a soda twice a week instead of everyday. Habits are hard to break. It all boils down to how bad do you really want to reach your goals?

What does a budget consist of?

Simply put a budget should consist of income and expenses. What’s going out should never be more than what’s coming in. Basically a budget is a tool to help you spend your money in the most effective way possible. One of my job responsibilities as an internal auditor is to analyze waste and help departments run more efficiently and effectively. A budget works the same way. You want to analyze how your money is being spent each month and eliminate wasteful spending all together.

Getting Started

Starting a budget is simple. There are plenty of apps that help with building a budget but a lot of them are not free tools, so unless you are making a whole lot of money and have a whole lot of expenses, I personally suggest building your budget out on paper first. Creating a budget manually whether in excel or on paper allows you to really get involved with your finances and create a budget that is just for you. Start by identifying your monthly net - income first. This includes all sources of income including full and part time job pay, child support, income from rental property, etc. Then jot down all of your monthly expenses. This includes but is not limited to the following:

· Rent/ Mortgage

· Utility bills

· Insurance ( Renter’s, mortgage, condo, car, health etc.)

· Hair (barber, beauty)

· Groceries

· Cable/Internet

· Daycare

· Student loans

· Cell phone

· Cigarettes, Alcohol

For those of you who are in two income households (couples, roommates etc.) your budget should be created together (I’ll make another post about relationships and budgeting soon).

Major Key Alert: I am going to suggest that you spend at least 1 hour every week going over your budget and your finances, especially if you are new to this or if your budget has gotten a little rusty and needs some adjusting. Trust me I am still tweaking my budget til this day, because I always have new goals. Weekly you should be tracking your spending on everything from going to the snack machine at work to dining out at night. You’re going to want to know this information to have a realistic estimate for your budget and prepare to cut spending in certain areas if you need to.

Now that you’ve created your budget, is it flexible?

In the physical, the more you stretch the more flexible you become, right? The concept works the same with your finances. Your budget will allow you to determine just how much flexibility you have when it comes to your finances. Your income can take you a long way if you stretch it right (or spend it effectively). Do you have some wiggle room if an emergency were to happen? Is your income equal to your expenses? Are your expenses greater than your income? What expenses can be eliminated without consequence?

Stay tuned on ways to trim your expenses within your budget and start working towards your goals.

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