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4 Tips on Budgeting

Personal bankruptcies are on the increase. Rising prices, inflation, high interest rates and other factors all put a strain on your wallet. So without a budget, life is a tragedy.

However, some people do not like the idea of being restricted by a budget. They do not even like the word "budget". Some call it money management. No matter what you call it, if you are like most people, you must "cut your coat according to your cloth", that is, spend only on what you have. You need a budget.

"But why do I need a budget now when I got along without one before?" you may ask. Simply put: It is because the purchasing power of your local currency is steadily decreasing. And why is this?

The world's financial situation bodes nothing good for you as common citizens. Financial tremors are threatening the economy of nations all over the world, due to hundreds of billions of dollars of debt.

This world debt has a stalling effect on the economic growth of not only the borrowing nations but also the countries that lent the money. Since virtually the whole world's money supply is deeply mired in debt, the purchasing power of your local currency is shrinking. No matter where you live, the cry is being heard. "We have to get used to living on our incomes, not our fantasies." A personal budget can help you to do this.

Budget will not give you more money but will help you to discover where money has been slipping through your fingers, and that will help you to control and make the best use of what you do have to spend.

But others claim that if they had just a little more income, they could get along fine and would not need a budget. That is only wishful thinking. Even the world's largest corporations, with multi-million-dollar incomes, have to budget. Besides, a Gallup poll has shown that no matter what the income, people in all the various income groups feel the same - they need just a bit more to make ends meet! Why? That is because most people spend more than they have.

Working out a Budget

A budget is your map for distributing income. With it you find out where your hard-earned funds now go, where they do not need to go, and where some, perhaps, ought to be going. You will find that such sensible money management does not really stifle the joy of living. To the contrary, happiness and contentment can come to a family free from financial worries. So do not consider yourself a miser - view yourself as a manager of family funds.

Here are 4 tips on budgeting to get started:

1. Work out your average monthly income. Most have found that the monthly basis is the easiest to work with. You have to add up all the incomes of all wage-earners in your family; salaries, interest, tax rebates and other sources of cash to you. Subtract any deductions made for income tax and other purposes. If any of the income is earned weekly, multiply by four and a third. That gives you an approximate monthly figure. Now add them up. That is what you can spend each month - no more.
2. Add up all your recurring bills; rent or mortgage payments, lighting and heating, telephone, and so forth. Since most of these bills come in each month, you can see why there is value in calculating your income on a monthly basis. Remember to include such items as food, beverages, newspapers and other things for which you probably pay cash each week. Now, you add up everything. Include your average expenditure for clothing, trips and vacations, entertainment, home repairs and upkeep, dry cleaning. These are items often overlooked.
3. There are some bills that are due once a year, such as taxes, automobile license plates and insurance. Divide these by 12 to get a monthly figure. At this point, what total expenses do you have for a month?
4. Compare the figure for your monthly income with the one for your expenses. What do you see? If you have enough to cover your bills, that is fine. But do not abandon your budget at this point. Save for the unforeseen expenses that will come along during the year. Things will wear out or break down. You must wisely allow for such.

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