Nickels and Dimes #4

budgetI read once, and I can’t remember now where or by whom, that we all have a budget whether or not we sit down and go through the budgeting process. If we live paycheck to paycheck, spending every dime, we are living on a budget dictated by how much money we have at the moment – in other words a budget that controls us. The better way is to develop our own and take control of our financial life.

Budgeting is actually easy, you add up your income, careful not to leave anything out or overstate your income from your job by using your gross rather than your net. Write down your expenses, separate the fixed expenses – such as your mortgage and your car payment from your variable expenses. The fixed expenses stay the same from month to month. The variable expenses, such as dining out and groceries, may need to be averaged out over a few months to arrive at a workable number. Subtract your expenses from your income and if the result is positive you’re doing well, if the result is negative you have to pick which expenses to reduce in order to balance your budget.

Once you determine how much you have to spend on each variable expense you have to devise the method that works best for you to control your expenditures. The old fashion way was to stick the budgeted amount in cash in an envelope and when it was gone – you were done spending. Modern software can eliminate the need for cash and envelopes, replacing them with spreadsheets or even an app on your smart phone.

Take control of your financial life, you will be much happier when you do!

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