Money Management ...
Budgeting and the Cost of Convenience
Author: Jake Newberry
When looking for ways to save money, starting with a budget is the way to go. A budget outlines your various expenses in a given period of time versus the amount of your income, and the balance between the two. A monthly budget is probably the most useful to track your spending habits. In fact about 15% of spending can be lowered without much lifestyle change at all.
Just by writing down a budget you will be better prepared to understand where your money is going. Sometimes it is shocking how much money gets spent on useless items like Starbucks or eating out at lunch. Writing your budget down will help you see where money is being spent and establishes a guideline to look back on at the end of the month. A budget gives you reason to take action and propels you toward a life of financial freedom.
Coming up with your first budget is fairly straightforward. Gather those involved in either income or spending of the budget and first list items that are monthly necessities. List things like: rent or mortgage, groceries, utilities, gas, and car payment. Payments on credit card debt should also be considered a monthly payment and included in your budget. The next step is to tally up the various sources of income for your family. Now you can compare income versus expenses and see how you are doing. Is there a great need for more income? Are there some things on your list that could be reduced or eliminated completely?
After you have taken an initial look at your budget, you can now consider items that are less essential than your first list. Ask yourself this question, "What do I want, and what do I absolutely need?" Of course shelter, food, and clothing are the bare necessities. Add medical, education, and childcare costs in there too. The non-essentials are items that realistically can be reduced or eliminated. Expenses from entertainment, travel, restaurant eating and impulse buying should be kept to a minimum in order to stay within budget.
Americans are all about convenience and retailers are setting us up to pay more money for a little more convenience. Fast food restaurants, quick marts, and cell phones are prime examples of conveniences. Credit cards are another convenience that could very well be hurting your budget. You can buy just about anything with a credit card and it seems so easy, until you get the bill. The biggest problem with a credit card is that it is quick and you don't realize how quickly you are spending until it is too late. The majority of credit cards have an APR of around 18%. This means that, unless you are consistently on time with your payments, you are paying an extra 18% for all of the goods you purchase with a credit card. Sure cards can be convenient, but they can also be expensive!
The benefits of a reasonable well thought out budget far outweigh the negatives. The budget will show you where your money is going, how you can stretch those dollars further, why you are coming up short every month on your bills, and what you can reduce or eliminate from your life. Put together a budget tonight and find out how much you spend on lunch, entertainment, or convenience in a month. It may surprise you.
Keywords: budget, budgeting, personal finance, expenses, money management
About the Author
Joe Larson
More Details about budget here.
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