According to a recent survey done by Gallup poll, only 30 percent Americans have a long time financial plan and about 32 percent take the time to put together a monthly budget! One of the biggest mistakes people make when planning a monthly budget, or any budget for that matter, is that they tend to leave out the small things in life. And there is a lot of them. From that cup of coffee that you bought at the overpriced coffee shop, to the movie you just had to see on opening day. And of course, all the other small things in between. In the long run, these add up. By the time, you get the invoice from the credit card company it’s too late. And it’s usually only then you will sit down and have serious thoughts about planning a monthly budget. With a little discipline and fortitude, it’s possible to plan a budget that suits you.
Budget planning comes down to one thing, staying financially within your means. Never fool yourself into thinking that a monthly budget will save you from unexpected troubles, such as a medical bill or a tree branch damaging the house. But it will help you greatly to deal with such a scenario. That’s what it is all about. There was a time when monthly budget planning basically involved balancing your checkbook. Not so anymore. The questions that should come to mind is “what exactly is my monthly income”? For some this a simple and obvious question, for others not so much. You must consider all the income you may be getting, such as stock dividends and so on. Then there are taxes. As the great Benjamin Franklin once said: “In this world, nothing is certain, except death and taxes”. After all these numbers, have been crunched, you will get a clear idea what exactly you must work with.
As mentioned earlier, you may get an invoice from the credit card company each month. This is an excellent place to start finding out what you’re monthly spending is. Most people will have two kinds of expenses. They can be divided into flexible and fixed expenses. Generally, fixed expenses will get the highest priority. If you are making a car payment, or mortgage loan, there will not be a lot of wiggle room. So, the first step would be to add up all fixed cost. Once this is done, you will get a clear picture as to what you want to cut down on.
After you have fixed cost figured out and out of the way, you can slowly start chipping away at flexible costs. Flexible costs can be different things for different people, but food and clothing are standard for everybody. However, even with something as important as food, there are ways to trim things. One way would be to eat out less. Grocery shopping with coupons can help save a lot in the long run. We can talk about cutting back on things all day long, but what we need to take away from all this is the importance of prioritizing our expenses.
In a way, our lives are not that much different from running a business. Just like a business, we need to set financial goals. We should ask ourselves where do we need to be financially at a time of our life. It can also help us make specific goals such as a car purchase. Even people who do have budgets and goals in mind, tend to it mentally. This is not a good idea in the long term. Always write down what exactly it is you want to accomplish. This will serve as a reminder of what the goals are. Pull out a sheet of paper and divided it into two columns. Left side for income, right side for expenses.
In this day and age, there are countless resources to help you balance your budget. There are websites and even software programs that can help you with it. There are even apps for smartphones designed specifically for budget balancing. When you consider how important something like credit score is, there is just no excuse not to do a monthly budget plan.
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