Preparation of a Personal Budget

Staying in a budget will help you pay down those credit cards faster.
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Now that final exams are merely a distant memory, its time to start planning for your next future. Not necessarily retirement, but maybe you’d like to take that trip to Paris you and your sweetheart have been talking about, save for a sweet new ride to go with the dream job you just landed or just get out from under all that credit card debt. Saving money is easier than it seems once you get yourself on a personal budget.

Dear Diary

Long before Facebook status updates people chronicled their days in a diary, a task you’ll need to adopt to learn how you’re spending your money. You don’t have to go retro and actually use a pen and paper, thanks to the many available expense-tracking applications you can download to your mobile phone. Check with your carrier and find an app that works best for you. Keep track of every time you swipe your debit card or pump quarters into the vending machine at work. Maintain your spending journal for at least a month for an accurate accounting of where your money is going.

Change Habits

After reviewing where all that money goes you need to start thinking about the expenses you can eliminate or at least reduce. It won’t be easy to completely cut out things you’ve grown accustomed to, so start small. For instance, you don’t have to bid farewell to your favorite barista – the one who makes your perfect mocha latte every morning – but consider cutting back on how many times you frequent the corner coffee shop. Lunch with the girls at work may be the highlight of your day, but you can save a lot of money by staying in. Talk with your co-workers and plan pot luck lunches or encourage them to brown bag it for a midday picnic at a nearby park.

Recurring Expenses

Make a list of all of your regular monthly, out-of-pocket bills like electricity, natural gas or other utility, phone, water, cable, Internet, student loans, credit cards, car payment, insurance and rent or mortgage. If you pay any of these things on a bimonthly or annual schedule, figure out what that averages out to each month. Some bills may not always be the same, like you’re your electricity bill. Estimate a monthly average based on previous bills. If you haven’t lived in your house long enough to do that, check with your utility service provider to get an average. Some utility companies also offer programs that enable you to pay the same amount each month regardless of usage. The amount is based on an average for your house, and these programs are designed so customers don’t have to worry about shocking increases in the summer months. Include any other recurring monthly expenses such as prescriptions, subscriptions and memberships, like for your gym or movie rentals. Based on your expense diary you should also have a good idea how much you need to set aside for food, cosmetics and toiletries, fuel and other necessities, which should be added to your list of recurring expenses. Don't forget to include any pet expenses too.

Do the Math

Now that you know how your money is disappearing, crunch the numbers and get yourself on a budget. Add up all your monthly expenses and deduct that figure from your monthly net income. The remaining amount is what you have to spend on everything else. You know -- like clothes, entertainment and all those trips to the coffee shop. Set aside some of that money for general savings and start working toward your budgeting goal. For instance, now that you’re getting two pedicures a month instead of four, put the extra money toward paying off those credit cards or student loans. Of course, you can also put it aside for that trip to Paris, too. The good news is you don’t have to be a certified accountant to track your budget. Quicken offers Mint, a free online money management program, and for you Excel users, save yourself the hassle of creating spreadsheet equations by downloading any of the free budgeting templates available through Microsoft Office’s website.

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