Budgets and Budgeting Management

When we find ourselves in financial troubles, we tend to do react in two different ways.  First, PANIC and let our problems control our lives.  Or, second we just pretend that our financial problems doesn’t exist and will magically disappear.

The truth is that to resolve our financial problems we need to have an action plan or a strategy to eliminate our debt or financial issues.

Consumers in the United States tend to overspend and not keep track of their finances.  As we are going through very tough economic times, we need to educate ourselves about spending and controlling our expenses.  Our financial lives are not different than a balance sheet.  We need to make money to covert our liabilities; also we need to understand the term “credit” and make sure that we know our limits.

Let’s make a rule for our success and financial health: The first and only rule for financial success is budget.

Budget is the key for our financial control and financial success.  I will tell you that is not easy stay on your budget, but if we keep focused, we can do it.

In order to help my readers stay on a plan and a budget, I have made a list of the most important types of budget and how to follow them.

The first thing that we need to understand is that a budget is nothing else than a list of your wages and expenses.  Setting an expense budget is nothing more than making a prediction about your upcoming expenses based on the best of your knowledge.

To better understand this concept I have divided the concept of budget into two categories: Expenses and Income budget.

Expenses Budget

IN your expenses budget you should include all your fixed liability that you know you will have to pay no matter what.  Here are some examples:

Rent or Mortgage

Car Insurance

Electric and Gas

Groceries

Gasoline

I will admit and agree that is difficult to keep track of all our expenses, but the main strategy for that is to set up a little fund to cover all those $1.50 coffees and $1.00 soda from the vending machines.

There are some expenses that we cannot control which are already fixed (rent, car insurance, etc.)  But, there are some expenses that we can tightly controlled such as going out to drink, eat or buying new clothes.  Remember, a budget is not a strategy to deprive your live of the good things such as taking your wife out for a nice dinner, have drinks with friends, or get dressed up for your best friend’s wedding.  A budget will help you be more conscious about your expenses and be more financially responsible.

Finances is a topic that we tend to keep in private and nothing is wrong with that.  However, you should be aware and fully conscious of your financial situation.

In an expenses budget we need to be aware of and careful with the real cost of our essentials needs.

Income Budget

The main purpose of an income budget is to prepare a list of all our sources of income that will primarily contribute to cover all our liabilities. We need to keep in mind that all our sources of income includes all the money that we receive on a regular basis.  Some of those are wages, child support, royalties, alimony, pension and public assistance.  Any other extra money is not considered an income (student loans, selling of property, garage sales, etc.)

Some of the problems that we will have in keeping track of our income budget are possible increases and decreases due to changes in our lives or geographic location.  Some examples that can affect our budget are increases or decreases in local and state taxes, demotions or promotions in or jobs, pre-deducted insurance premiums by our employers due to lifetime changing events (birth of a child, marriage, etc.)  All these aspects need to be taken into consideration prior to paying bills.

Some of the most important decisions that we will have to make during this process is to set money apart for savings. One of the questions that requires the most frankness is, "Does it make sense to save money now?", or, "Should I pay all my bills and then rebuild my savings plan after my main financial problems are solved?"  To be honest with you, the answer is something that you as a consumers and manager of your financial life would have to weigh.

Alexis.