Home Budget Planner
In order to fully understand your financial situation, you must create a home budget planner which helps determine your monthly income and your monthly spending. This simple exercise can be a real eye opener for most people, and while the news is rarely good, it is a vital first step towards financial freedom. Here's a simple five step process to help you balance your budget.
Grab your tools. You will need to get copies of your banks statements, checks that you've written, credit card statements, receipts of major cash purchases, and income statements for the past 12 months. If you're married, you're spouse should join in the fun in order to track your household spending and income.
Organize your spending. Write down a list of all your expenses, and separate them into three main categories: fixed (expenses that don't change, like rent, insurance premiums and car loans); variable (expenses that change monthly, like groceries, movies, baseball games, etc.); and periodic (expenses that are paid occasionally, like property taxes and tuition). This is the backbone of your home budget planner.
Trim the fat. Money leaks from everyone's wallets. Take a hard look at your expenses and ask yourself: "Do I really need that?" Simple reductions add up quickly: a $5 coffee five days a week costs over $100 a month. Switch to Folger's and save a ton of money.
Look at your totals. Add up all three types of expenses individually, then together. This gives you your total spending for the month. Next add up your monthly income (jobs, child support, benefits, etc.) and compare the two numbers. This gives you the bottom line on your bottom line. Focus on the variable expenses and ask yourself which ones can go. If there are fixed expenses that can be avoided or reduced, all the better.
Be honest with yourself. Is your home budget planner accurate? So it looks like you spend $500 less than you earn every month... Hooray! Before you celebrate, however, take a look at your expenses again. Are you paying off your credit cards every month, or only making partial payments? How about your mortgage: is it a fixed rate or a negative amortization loan, which means your mortgage is growing? It's important to realize the true meaning behind your income and expenses, and if you aren't paying off your debts, your monthly surplus means nothing. Once you get those debts wiped off, then it's time to celebrate!
Check out this family budget planner. |
