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The Budget: Your Financial Foundation

A lot of people ask me how they can get started reaching their financial goals. And my answer is always that you must first do a budget.

Having a budget means you understand where your money is going. And once you understand where it’s going, you have a basis for future financial decisions. In this sense, a budget is the foundation of any financial plan.

Do the math
Start by listing the basic bills you pay each month, such as rent/mortgage, utilities, car, student loan, credit card payments, gasoline, insurance, cable, phone, and Internet. Don’t forget to include money donated to charity, food, clothing, savings, travel expenses, entertainment, and miscellaneous expenses.

A great budgeting tool to use is your online bank or credit card statements. These will often offer an itemized list of your monthly expenses.

Implementing the budget
Making a budget is easy. The hard part is implementing action steps as a result of your budget. If you’re not willing to execute needed changes in preparing a budget, then it’s not worth any more than the paper you printed it on.

Subtract your monthly income by your monthly expenses to see what is left over. This “leftover” money can serve as a piggy bank to build up a safety net of savings, and then to your future dreams.

Dedicate your piggybank money to your goal: paying down debt, saving for an emergency fund, saving for retirement, buying a home or vacation home, or taking a family trip. Continue to find ways to make your budget work for you, not the other way around.

As with anything in life, perfecting your budget will take practice. It requires monthly attention, and sometimes weekly. But there is no better starting point to financial success than a sound and basic budget.



ONLINE BUDGETING TOOLS

http://office.microsoft.com/en-us/templates/default.aspx
Microsoft Office offers custom budget templates.

www.budgetpulse.com
Budget Pulse helps keep track and manage expenses.

www.buxfer.com/index.php
Manage even more than your budget with Buxfer.

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