A Budget Does Not Have to Be Scary

Many people don't know how to create a budget or spending plan and don’t know where to start. The first step to getting out of debt is by creating a budget.  Creating a budget shows accountability for your spending and shows you how much you have coming in and how much you have going out.   

A budget is an itemized summary of your total monthly income after taxes minus - everything you spend money on. A budget helps you prioritize your spending and helps you manage your money no matter what your income.

A budget is only restrictive if you don't have any extra cash left over after you pay your bills. Make your budget flexible so you have "wiggle" room for unexpected expenses. If you don't have an emergency fund or savings to cover those unexpected expenses you can see right away what areas in your budget you need to reduce spending instead of using a credit card to pay for those unexpected expenses. 

The first step is to determine if there are some areas where you are spending too much money, you want to have a balanced budget of 70-20-10 and make sure you don't spend too much money in any one area of your budget.  Develop financial goals for yourself when creating your budget.  

Seventy percent of Americans live paycheck to paycheck and forty percent of Americans live above their means. This statistic shows there is a serious problem in America. 

When your budget is out of balance you use credit cards or risky financial options when causes you to go into debt and this can lead to serious financial problems such as foreclosure, bankruptcy, etc. If you know how much money you earn you should also know how much you spend. Here are 7 ways to create a budget and track spending. 

Calculate 
Subtract monthly expenses from your monthly income. If the total is negative or less than 5% of your total monthly income that is a red flag that you need to make some major adjustments to your spending.

Track

Track spending daily, weekly or monthly. The ideal method is weekly. Keep all your receipts and reconcile your bank accounts. Use an automated software tool, pen and paper or the envelope method.

Balance Spending

Spend 70% of your monthly income, save 20% of your monthly income and donate 10% of your monthly income to charity. This ensures you have a balanced budget and prevent overspending.


Create a Support System

Surround yourself with at least three people who are doing better financially and gain financial advice from them.


Evaluate Spending Habits
Don't keep making the same mistakes.


Seek Assistance
Seek professional help if necessary.

How to Protect Your Money From the New Tax Code

Many people know they should track their spending and create a budget or spending plan but don’t want to.  The thought of knowing how much money you actually owe, how much money you earn and how much money you actually spend each month is terrifying.  If you create a budget you will quickly see how you spend your money.  You won’t be able to hide it or run from it any longer.  If you know, other people may know too, yes those other people are your creditors who continue to call asking for a payment. Learn more at http://tiny.cc/kbnmpy

Many people are fearful of creating a budget and have good intentions by creating one but don’t stick to it.  To stick to creating a budget you have to view a budget as a tool to help you.  You are the only one who has to see your budget.  Many people today live paycheck to paycheck and are in mounds of debt, in some cases because they didn’t create a budget or didn’t stick to it.

If you know how much you earn, how much money you owe and how much money you spend you can change the direction of your life.  A budget helps you if you have an unexpected expense and when an economic change occurs such as tax code change. In 2017 the country experienced several fires, hurricanes, floods and earthquakes some in areas that were not expected.  If you did not have homeowner’s insurance to cover the damages that is example of unexpected expense. 

Create a budget by writing down everything you spend money on each week or during each month and subtract your income.  If the result is less than 10% of your monthly income you need to make some adjustments to your spending.  A balanced budget consists of: 15% transportation, 15% debt, 10% savings, 35% housing and 25% other expenses. 

Create an emergency fund to cover your total monthly expenses for 9-12 months.  Creating a budget will help you to reduce spending and prevent you from using credit cards to pay for purchases.  Use credit cards for emergencies only.

Develop financial goals when creating your budget. Financial goals provide motivation for you to work towards reaching that goal and provides a sense of accomplishment when the goal is met. Some examples of financial goals are: pay off a credit card, buy a home, start a business, take a vacation, etc.  Here are 6 ways to create a budget and stick to it.

1. Take accountability. Take accountability for your actions, don’t blame others for your current situation.  Learn how to be flexible and adjust to changes in your life.
2. Use pen and paper, use a software tool like Quicken or Microsoft Money or use the envelope method.  Once you visually see where you are spending your money it will make it easier to reduce spending.
3. Create goals. Write down a list of at least 5 financial goals. If you cannot achieve any or can only achieve 1 or 2 of your financial goals you need to make some changes in your spending habits. Write down a list of all of your debts.  Develop an action plan and beside each debt write down steps on how you can pay the debt off: reduce spending, use coupons, use money savings tips, earn extra income, etc.
4. Pay off small bills first. Pay down any small bills and debt first.  Once all your small bills have been paid off start tackling the larger bills. Setup payment plans for bills you cannot pay off in full. Be sure the account balances are updated on your credit report.
5. Support network. Surround yourself with at least three people who are doing better financially and gain financial advice from them.
6. Seek professional help. Consult a financial coach, financial planner or advisor to help you create a budget or spending plan and provide recommendations to help you stay on track.

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7 Ways to Accomplish Your Financial Goals

Change Your Thinking

 You may have to your thinking if you currently thinking negatively, have low confidence or doubt yourself. You must think positively and believe in yourself to achieve any goal. Learn at others who have successfully achieved their goals for inspiration.

List

Financial goals are what you plan to do with your money. Financial goals are important to you, within your power to make it happen, something you know you can achieve and are clearly defined and have a specific plan of action.  Create between 5 - 10 goals.  Spread the goals out over time. Create a goal sheet with a start date and target date along with details about the goal and benefit of the goal.  Use action words when creating each goal such as, “Complete” or “Study”, “Create”, “Generate”, “Assemble”, “Budget”, etc. 

Create SMART Goals

Specific (Who, What, Where, When, Why, Which) - "I want to go American University for college.” Measurable (How much, how many, how will I know when the goal is achieve) - "I need $120 for my school trip”. Attainable (develop or identify skills needed to achieve the goal, create a plan of action and timeframe) – “I want to buy a used car less than $15,000”. Realistic (an objective you know you can achieve and are willing to achieve) - "I'll save $50 a week from Thanksgiving to Christmas to buy a new pair of shoes".  Timely (set a timeframe when you will achieve the goal or set a goal that is tangible – taste, smell, touch, see, hear that you believe you can accomplish) – “I’ll save $600 by the end of the year to buy a new computer”. Visualize.  Imagine yourself achieving your goal and what your life will be like when you have achieved the goal.  

Start Small

Define short-term (0-3 years) and long-term goals (3 years +).   Create small goals that you know you can achieve.  Once you have achieved a few goals this will strengthen your confidence which will help you to achieve larger goals.  This will make it accomplish future goals and reduces stress and frustration when trying to achieve a more complex goal. 

Set Dates

When the target date arrives identify if the goal was achieved or set a new target date for the goal. Don’t create more than 1-2 goals with the same start and target date to ensure you can accomplish the goals so you don’t become overwhelmed.

Prioritize

Prioritize the goals by importance, start date and target date. Some goals may be eliminated or put on hold. 

Develop a plan

Develop an action plan to identify how you will achieve each goal.  Writing a goal down makes it easier to commit to it.  Write down an action plan to achieve a goal identifies the benefits and how you will achieve the goal. Do at least one thing each day to reach your goal. Update your action plan to track steps you have accomplished towards achieving your goal.  Avoid distractions and stay focused on your goal.  

Evaluate

Evaluate and review your progress. Track your progress with pen and paper, a smartphone or use an online tool.