Introduction on How To Budget

Budget - Squeezing your Dollar

How many of us truly know how to budget? By that I mean, are we capable of setting up a?reasonable?budget and stick to it? Personally, I am a whiz at setting up a budget, seriously, I am. I can tell you exactly how much I need to set aside to pay for auto insurance, utilities, food, DEBT REDUCTION, etc. BUT, my biggest?challenge, and the?challenge?that I think most of us face is being able to stick to a budget once we set one up.

Budget Fails

Staying true to ones budget is probably one of the biggest stumbling blocks anyone faces when attempting to organize their finances. Quite often the failure is due to being unrealistic or unreasonable in their expectations. By this I mean that setting up an extremely austere budget where no room is left to take care of yourself. Not being able to do the things you enjoy, the things that let you decompress and unwind, eventually lead to frustration and more likely than not, unplanned spending. I think this is one area that is often overlooked when setting up a budget. There has to be a little left over to take care of yourself and to allow yourself to?periodically?relax and engage in the hobbies or activities you enjoy.?Unfortunately?most hobbies and leisure activity have a cost associated with them, so not budgeting for these items is not only foolhardy, but a first step on the road to failure in one’s personal finances.

?One other cause of failing in an attempt to live within a budget is unexpected expenses. Tires that reach the end of their lives can strain even the most fanatical budget keepers. ?One interesting aspect of a situation like this is that most of us know that those tires will have to be replaced soon. Yet we don’t plan for it! It’s easy to kick the can down the road and deal with it when you no longer have a choice. This?doesn’t?just apply to tires, any major purchase of expensive consumable can apply. Printer Ink or toner, filling a propane or fuel oil tank, routine car and home maintenance are examples of what can be expensive budget busting expenditures. Emergencies can have an even greater and more profound impact on your capability to keep a budget. ?Having a major household appliance or worse, a home heating or air conditioning unit fail can be catastrophic to anyone trying to keep a budget who?didn’t?plan on or keep an emergency fund to handle situations such as these. Creating and keeping an emergency fund is an essential part of creating a realistic budget.

One area that can?also?be a challenge when budgeting is identifying funds that can be used to satisfy debt. “How can I get money” to help with my debt elimination plan is often a phrase that crosses my mind, usually when I’m paying my bills. There are surprising ways to come up with extra cash, I’m sure that I will write at least one post on this topic alone. Options range from selling items that you no longer use to evaluating your personal vices (star bucks, smoking) to target and capture some extra funds. Creating and maintaining an Income Stream (other than your day job) is an interesting topic that warrants some attention, so you’ll be seeing articles on these topics as well.

Budgets and Vice

Speaking of vices, I can personally attest to the drains to my personal budget that both smoking and premium Coffee have caused me in the past. I’m a recovering Starbucks $8-$10 a day coffee drinker. I haven’t quit the?coffee?altogether,?but I’ve trimmed it down significantly! I struggled with both of these vices financially because I essentially used pocket money for both. What really helped me take control on these items was making them part of a written budget. I did that during 2012 and towards the end of the year, seeing exactly how much I had spent on both was an eye opener and forced me to change some of my behaviors.

Setting Up a Budget

Setting up a budget consists of several key steps. I’ll have a series of articles later “How to Budget” that cover these steps in more detail but in essence here are the key concepts and steps towards creating a budget:

  • Select a budgeting method and tool (I’ll have a complete article on this topic
  • Identify your monthly obligations (All of them)
  • Setting up a payment plan in a?priority?order for your outstanding debts, there will be a number of articles on this.
  • Identify your income streamsImplementing and keeping to a budget
    • This will include identifying other sources of income or money that you may not be currently using
If you’ve ever wondered whether there was anyone or anything that?could,?”help me budget” then I hope that the forthcoming articles will be both informative and useful to you in your goals of developing and more importantly, keeping to a good personal budget.?The articles that you’ll see published here will not only cover the essentials of?budgeting and budgeting techniques but you can expect to see topics on making the budget realistic and sustainable as well as topics on why people fail in their attempts to control their financial destiny. There will be a lot of common ground covered between “Budgeting” and “Debt Elimination”. They go hand in hand so I’ll be interleaving articles within both categories in a sensible order.

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