Budgeting - An Overlooked Key To Financial Success
July 2, 2008 · Print This Article
This fact seems intuitive: one needs money to make money. Those who are young , and don’t yet have much money, might be discouraged by such a rule of thumb. Obviously, however, it is not impossible to increase the amount of money one has. Having budget is an overlooked prerequisite to making money. That is, to make money it is important to first keep track of the money one already has.
To be successful at making a budget, one must make a concerted, whole-hearted effort. One mustn’t dally and only do part of the job. Yet, making a budget does not need to be a source dread. It only takes thirty minutes to an hour, if one knows what one is doing.
The more detailed the budget, the better. A budget needs to track the budget-maker’s flow of money. The budget-makers needs to know exactly where the money comes from, how much money he or she has, and how it leaves his or her hands. Here is how to make a successful budget that will help you gain vast wealth.
First, keep track of your financial papers. Collect the statements you get from banks, as well as all your bills, and all other notices concerning money either entering or departing from your hands. The Internet should make much of this easier than ever before: many banks will keep track of all your statements for you on-line, as well as show you copies of any checks you may have written. If you can’t use a computer to organize your financial documents, get an old-fashioned filing cabinet. Either way, you’ll have a large pool of data about your income and expenses for quick reference.
After you have done this, write down how much money you make every month. Look at all of your income sources. Any job you have, any paintings you sell, everything that goes into your bank account should be taken into consideration.
Then, write down everything you plan to spend money on in a month. This includes such obvious expenses as rent or mortgages, bills, and money for gas or public transportation. It also includes less obvious expenses, such as going to the movies, or indulging in restaurant meals, or even buying cigarettes. Don’t exclude any likely expense, no matter how much you would like to pretend it isn’t there.
The next part is crucial, and ignored by too many well-meaning budget-makers: divide up your expenses into two groups. The first group should be for expenses that you cannot change from month to month, and cannot do anything about. Examples of “unchanging” expenses are credit card payments, rent, loan payments, your phone bill (especially if you have a contract with your phone company), or cigarettes if you don’t realistically plan to quit smoking. The second group, which is going to be the most important as far as managing your budget, should be for expenses that can vary from month to month. Examples of “flexible” expenses include eating at restaurants, drinking, or buying your favorite brand name goods.
Once you have done all this, compare your income to your expenses. Are they about the same? Or are you earning more money then you are spending? If you are, you are on the right track to financial success. Don’t just spend all that extra money. Instead, look into ways your can use the economy to make your money grow. Think about starting a retirement account, or look into stocks or mutual funds. Research (the Internet, again, is your friend). Make wise investments.
If you aren’t earning more money than you are spending, look at your list of ‘flexible’ expenses. Think about what you can remove. Once you have a list, it shouldn’t be difficult. You might even be tempted to quit smoking.
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