Wednesday, February 27, 2008

Budgets

As talked about in a prior post, budgeting is the first step and most important step in saving money. Setting up a budget isn't too difficult to do at all, its sticking to it that is difficult. No joke, it is extremely tough to keep everything straight. It ll be fun at first, then slowly you see how horrible your spending habits really are, then it becomes a difficult task to keep track of this spending, it will pain you to put each cash payment, or credit card purchase into excel. As much as it hurts to do, and you get down on yourself because you spend money like an idiot, all these hours you work at jobs you hate...that money you make just gets blown on stupid stuff. That's good though, because now you are starting to realize where your money is going..then you can adjust accordingly...cut a little back here, cut down how much your talking or texting on your cell phone, etc...

Steps:
1. Build a budget (excel works well)
2. Set up a system (in excel as well, use another sheet) of tracking all of your spending...to the penny
3. At the end of the month, or the week, compare your totals of money spent in each category with what you put in excel as the budgeted number
4. Analyze what you see, how much over or under you went in each category and adjust your budget and spending accordingly.

When I would set up a budget, I would sit down, think of everything you spend money on, and think of a reasonable number (based on your past spending habits) of what you would want to spend monthly in that category...you may have guessed wrong, so after the first few weeks/months you can go back and adjust.

You need to be honest with yourself though, you cant forget to add certain expenses in there, or put them in a different category because at the end of the month you don't want to see that you spend $600 at bars!

Remember set up a savings account, and make sure that you have savings in your budget as a fixed expense.

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