The Value of an Old Fashioned Budget
Two conflicting trends have surfaced within the American culture: Americans are earning
more than ever before...but saving less. A study conducted by the National Center for
Financial Education showed that the average consumer wastes 30 percent of his or her
discretionary income, money which could be used for saving and investing. Worse yet, even
fewer people know what their discretionary income is. The solution? Develop a good old
fashioned household budget. Here are the steps to help you get started:
- Determine your net monthly household income (subtract taxes and other payroll deductions). Remember to add any supplementary income such as interest, stock dividends or income from rental properties.
- Assess your monthly expenses. Reviewing the past will help you anticipate the future. Don't guess...take time to analyze your spending habits by reviewing old bills and returned checks.
- Establish major budget categories. Review the amount you spend each month on: food, housing and utilities, loan payments, dependent expenses, medical bills, taxes, insurance, recreation, clothing and personal care items.
- Review your budget. Track your budget periodically. If you get off track, look for ways to cut back.
- Put your personal computer to work. There are several inexpensive, user-friendly programs that will help you make budgeting fun and interesting.
- Another way to start saving money is through a systematic plan. When a portion of your salary is automatically transferred to a long-term savings account, you're saving money regularly and learning to meet expenses with less money.
Learning to budget your money allows you to start achieving long-term financial objectives like saving for college tuition, retirement and other important goals.
