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Budgeting: The Realistic Way

Posted by : Premraj | Posted on : Thursday, July 30, 2009

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You may think that having a budget is simply checking your bank statement to see where your hard earned money is going, but that is far from the whole process.  There are a lot of components involved in making a proper budget, but luckily, just looking at the bank statement is the first step.  In order to build a realistic budget, you need to chart money that is coming in and where it is going.  This enables you to realize your spending habits and trim spending.  An online budgeting software can give you a visual picture of your spending so you can do just that sort of tracking. Graphs are much easier to read than statements, and instead of seeing a page of numbers like on a bank statement, you can see what percentages of your income are being used toward both fixed and variable bills.  By tracking your money, you can begin to build a realistic budget. 

Tracking expenses may seem tedious, but all you need to do is look at your bank statement.  For those of you who don’t rely on your debit card 100% of the time, software can help you track your spending every day.  While many think checking their email is an important thing to do daily, charting your spending daily is by far more important, and it’s a habit that will set you up for financial success. 

While you’re charting your spending, it is important to acknowledge those fixed bills that are constant.  These can include a car payment, rent/mortgage, phone bills, and other utilities.  It is always better to document these items with the bill in hand. If you just estimate them, you may come up short before your next payday.  Rather than give yourself another thing to stress about, it is a good idea to overestimate these amounts for a little extra cushion.  For example, if your rent or mortgage payment is $879.00 U.S. dollars, round up and track your expense as $900.00.  This way, your bank account should never reach $0.00. 

Another important aspect of creating a realistic budget is to examine whether you are living a realistic lifestyle.  You might notice after a bit of analysis that you are living extremely out of your means.  Instead of simply spending money, you have to acknowledge where it needs to be spent.  For some people, that means eating out less and not going over minutes on their cell phone. 

Especially if you have credit card debt, an advantage to having a budget is to see that your hard work and planning is helping make you financially free.  For some, not having a budget is like sentencing yourself to prison without parole.  By living within your mean and adjust spending habits, your budget will empower you to live life to the fullest. 

What are some tips that help you budget?

Comments : 12 Comments | Category : Budgeting | Tags :

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