Budgeting and Saving

Money is a necessity of life. This is why it is so important to manage your money wisely and start saving early. Making smart decisions now will prepare you for the future and will make your financial dreams come true. Below are some tips on how to make your dreams a reality.

If you want to gain control over your personal finances, you must first figure out exactly where your money is going every month. Keeping track of every expense for one month can be a real eye-opener. You might be surprised to learn how much your family spends on unnecessary things. 

Have every family member keep track of every penny spent for an entire month. Each person can carry a small notebook, record every expense, whether in cash, by check, on a credit or debit card or through an automatic deduction from a bank account. Be sure to indicate exactly what the money was spent on. At the end of the month, list every expense according to the following categories:

Needs

• Rent/mortgage payment
• Home maintenance/repair
• Home/renter's insurance
• Groceries
• Home supplies (cleaning products, paper towels, etc.)
• Utilities (gas, electricity, water, garbage service)
• Transportation (car payment, gas, car repair, public transit)
• Health insurance/medical expenses
• Education
• Alimony/child support
• Car and home/renter's insurance, vehicle registration, property taxes (figure out one month's worth of the annual expense)

Wants

• Food and drinks purchased away from home
• Clothing and accessories
• Cosmetics
• Internet hookups
• Telephones
• Pet expenses (food, toys, boarding, vet bills)
• Entertainment (cable TV, movies, video rentals, concerts, magazines)
• Vacations, dues and subscriptions (divide a year's worth of expense by 12 to determine an average monthly expense)
• Interest on credit card balances, other non-mortgage loans
• Gifts/Charitable contributions

If your family barely makes it from paycheck to paycheck without running out of money, your list of expenses will show you why. Recognize the difference between your expenses for things you need compared to things you want. If you need to reduce spending, identify the "wants" items that can be eliminated or trimmed without significantly affecting your lifestyle.

Decide how to allocate your monthly income among your expense items to create a monthly budget for future spending. Make sure all family members understand what types of expenses they need to restrict, and compare your monthly expenses to your budget numbers every month.

To gain control of your personal finances, it's also important to set financial goals for the future. A nice vacation, a new home or automobile, education/training for your children, retirement income and a nest egg to cover emergencies must be planned and saved for. The best way to reach those goals is to add another item to your "Needs" list - Savings. The more you can allocate to that category every month, the better. But saving even a small amount every month is critical if you hope to ever reach your life goals. Saving for the future rather than spending on items your family wants now requires discipline, but you will find that it is well worth the effort.