Budgeting

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Start a budget and stick to it!

But first is to figure out how much money you spend and what you spend it on. Keeping track of all your expenses is critical. This means every coffee, magazine, and snack you buy. You want to account for every penny you are spending. Once you have all your numbers, organize the data in to categories like gas, groceries and mortgage, totaling each amount. If it helps, use your credit card or bank statements to gather this data. If you bank online, you may be able to filter your statements to easily break down your spending.

After you get a good assessment on what you spend each month, begin to organize your expenses into a useable and manageable budget. It should highlight your expenses and how they measure up to your income. This will help you to plan your spending as well as cutting any areas where you tend to overspend. Along with your regular monthly expenses, you need to include expenses that occur irregularly such as car and home maintenance.

It’s imperative that you meticulously budget. Log in to your financial accounts daily and re-categorize expenses to make sure they have the correct amounts in your different categories. The goal is to see how much you make and where every dollar is going to.

Set a daily calendar reminder to log in to all your accounts and see what’s going on. Sign up for alerts on all your bank, credit union, and credit card websites for things like low balances, unusually large transaction, payment due date reminders, and daily account balances. And make a quarterly date with yourself (and your spouse or partner, if you’ve got one) to look at your financial picture. Use this time to understand where your money is going to, and what you would like to change in the future.

We suggest you set guidelines for your monthly expenses and review and compare them to your actual monthly expenses. Typical guidelines are:

Housing 35%: Monthly payments (rent, mortgage, taxes, repairs, improvements, insurance, and utilities).

Transportation 20%: Monthly payments (gas, oil, repairs, insurance, parking, or public transportation).

Debt 15%: Monthly payments (credit cards, personal loans, student loans, and other debt payments).

Other Expenses 20%: Monthly payments (groceries, medical bills, prescriptions, clothing, or personal items).

Savings & Investments 10%: Monthly contributions to retirement or investment portfolios or savings accounts including any 401K or IRA.

Creating and faithfully using a spending plan is probably the best way to help you meet your financial goals. Be sure your budget is realistic and matches your actual needs and goals.

Instead, evaluate all your spending before creating your budget. Track every penny including incoming and outgoing transactions, for at least one month. You can use personal finance software to record and categorize your income and expense transactions. Many programs will automatically download your data directly from your banks and credit card accounts and will develop a quick budget based on the recorded information. Use this as a starting point, and tweak after three months, six months and then annually. Reevaluate your budget as necessary to make it as easy as possible to follow and achieve your goals.