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Do You Have a Budget Plan?

Being good with your money is an important skill to have. Many people across the country make a good wage, and yet still find themselves constantly living from one pay check to the next. Often, people spend up big on their credit cards because they run out of their actual cash and end up even more worse off, with even more debt to pay off from the next pay check. It is this sort of behavior that can end up leading to serious financial problems – it can be very easy to fall into a debt trap that leads to defaults and bankruptcies. Obviously this is something that you want to avoid! Of course, life is full of unforeseeable circumstances that might result in you getting into financial trouble. However there are steps that you can take to get yourself into the best financial state possible.

Getting together a budget plan

You will no doubt have been told about the importance of budgeting before, but do you actually do it? Many of us intend to budget properly, but end up only doing a weak job of it. However, having a complete budget plan is essential if you want to have financial freedom. A budget plan is a way of tracking your income and expenses every fortnight or month to make sure that you are not spending more than you are making. There are many different ways that you can do this, and many different tips that you can use to maximize how effective your budget plan is.

How to make a budget

Using a spreadsheet is a very easy way to make a budget plan, if you have access to a computer every day. Using a program such as Microsoft Excel, you will be able to draw up a budget plan and use features such as those that automatically add rows or columns of numbers. The first thing to do when you are using any budget plan is to come up with a full list of your incoming money and your expenditures. You should spend a fair while on this step of the process, to make sure that you make a completely comprehensive list. When you are listing your income, make sure you include your wages and any incoming money from investments. Many people have other incomes as well that they might forget to add. Do you sell crafts at markets once a month? Do you regularly sell old belongings on EBay? Do not forget to include these things too!

Next, you need to think of all of the outgoing money in the fortnight or month (choose whichever period that matches your normal pay cycle). This includes such things as rent or mortgage, car payments, loan payments, food, utility bills, phone and cell phone bills, travel costs, clothes, toiletries, entertainment and anything else that you regularly spend money on. When you are first doing your budget plan, list your expenditures as they currently are, not what you would like them to be! This will give you a very good idea of where you are currently going wrong, and where you can cut back.

How to cut back and save more

When you have all of your expenditures listed, subtract the total of those from the total of your income, and look at the difference. If you have a positive number, that is good. However, many of us will have a negative number, which means that we are spending more than we make. In either circumstance, it will be very helpful to tighten up your budget to leave you with more money to put into savings. Look at your list of expenditures – is there anything obvious that you can cut back on? There will normally be at least one category there that will be higher than is necessary. For some it will be clothes, for others food, for some entertainment. Whatever it is, work out how you can cut it back to a more reasonable amount. You do not need to cut it out completely, just try to be sensible about how much you need to spend.

Learning to cut back on unnecessary expenses is the key to keeping a good budget plan. When you start to cut back and realize how much money you have been wasting, you will likely be quite surprised! The best thing is that this money can all go into savings, or into paying back debts if you have them. There is no need to live life without having fun and treating yourself, but it is possible to do this without going overboard and getting yourself into financial trouble. Learning how to budget is one of the smartest things you can do for your finances, and is likely to leave you in a very strong financial state so that even if there are any nasty surprises you will be able to get through them much more easily.