Budget Edification

The concept of budgeting is, "Live within your means." Make more money in comparison to how much is spent. All factors are adjustable. People can get what they need regardless of income. In addition, people with high income should be aware of their limitations.

First, figure out your monthly expenses. This covers monthly bills, insurance and taxes:

• Mortgage or rent payment
• Automobile payment
• Home, health insurance
• Automobile insurance
• Medical bill payment
• Credit card payments
• Loan payment
• Student loan payments
• Cost of food
• Cost of utilities
• Automobile maintenance
• Gasoline
• Home maintenance
• Amenities
• Taxes

Companies do not send out monthly statements for all expenses. Insurance, amenities and taxes are revised into a monthly expense. For example: automobile insurance is $800 every six months. Divide $800 by 6 is $133.34 deposited into a special saving account each month.

Amenities are monthly and spread across several months. Plan a clothing budget with a quarterly or biannual budget for each person. Now apply the automobile insurance method to estimate an approximate clothing budget.

Deodorant, toothpaste, shampoo, conditioner, soap and so-on are needed at different times. A petty cash budget assists with these items. Deposit $30 or so dollars each month to pay miscellaneous costs or buy it in bulk biannually to create another approximate amount.

Always pay property tax. It is the most vicious tax. The government will foreclose a home without a thought. Even bankers try to make arrangement. The government will take a home and give it to whoever pays property tax. If you don't know how much property tax is, consult a financial planner.

After estimating all costs, compare it to income. Income includes pay checks and additional monthly income. Tailor factors by necessity to decide on cutbacks if overspending. The state offers affordable insurance options; banks refinance loans, offer balance transfers and consolidate loans. These options can lower monthly expenses; however, lower payments mean longer loans, yet it is easier to pay more when possible than go without food.

It is also possible to make more money. Do you deserve a raise? Is there an option for side work on the weekends? Is there potential income related to a hobby or entrepreneurial pursuit? Should you apply for a better paying job?

Planning for the future and emergencies is import. Start putting money into retirement and education fund now, so it compounds. Even though these events are not taking place for a couple decades the Rule of 72 makes an incredible difference. The Rule of 72 applies to compound interest on savings and investments. Take the interest rate and divide it into 72. A 6% annual percentage rate doubles every twelve years.

The best future involves paying debt so whatever is in the retirement fund goes to living expenses. Payoff the smallest bill with extra income when possible, so when it is paid there is more money to payoff another bill until everything is paid. Eventually a person owns their car and home. This equals more income to spend as desire or save for big items.

Emergency saving is for emergencies. People don't know when their car breaks down or they become unemployed. Set a goal of having three to six months income in the bank. A deposit of $300 each month produces $18,000 dollars in five years. However, placing $10 a month offers a buffer in stressful situations. It is better than nothing.

Budgeting is the foundation of planning expenses. Though tricky for those who need it the most, focus on achieving goals to become successful.

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