Budgeting.
The dreaded “B” word. Not many words evoke such an unpleasant feeling, but don’t let it scare you. A budget is simply a way, or plan, to make your money work for you…not the other way around.

Dictionary.com defines the word budget this way.

“an estimate, often itemized, of expected income and expense for a given period in the future.”

Budget planning should address:

• How much money do you make?
• How much money do you spend?

On average, people spend 10% more than they make each month. By using a monthly budget you can cut hidden spending, increase savings, and eliminate debt. Isn’t that what we all want?

When you see that a budget is just spending your money with a specific intent, you'll actually experience more freedom than before.

Creating your budget

• First, list your income. Be sure to include all income including alimony, child support, investments, etc.
• Next, list your fixed expenses such as rent, mortgage, child care, car payment, savings, charitable donations, etc.
• Then list your variable expenses like groceries, haircuts, gas, and debt repayment.
• Subtract your expenses from your income and you will see what is left over.
• If you have extra money left over create specific categories that need to be funded.
  
  If you know you will need to replace a vehicle soon create a new vehicle fund. If you vacation each year make sure you are contributing a certain amount to your vacation fund each month.
  
  Don’t forget Christmas and even birthdays they happen every year at the same time. There is no excuse not to plan for them. For example, let’s say you spend about $800.00 on Christmas. You need to take $800.00 and divide it by 12. You should be saving about $67.00 per month. If you do you will be able to spend your own saved money and not rely on credit cards to “help” you out. It is a very empowering feeling to do this.

If you end up in the red on your first budget you need to do some trimming. Some ideas might be to look over your insurance policies to see if you can raise deductibles. Maybe you can cut out some of your trips to Starbucks. Can you live with basic cable rather than movie channels for a while? Be creative…it will be worth it when you realize you are in charge of every penny that you make.

Be sure and realize that a budget is a plan and it will take 3-4 months to start really working for you. You may need to tweak the grocery budget one month and reduce the entertainment fund the next, but know that it will work if you stick to it.

Note: I highly recommend that you keep all your financial information in one location. Whether it be a plain notebook, a simple spreadsheet in Excel, or an online source (such as Wesabe,YNAB, Quicken, or Mint) having all of your financial information in one place will create an organized and controlled environment on your quest for a happier financial life and eventual financial freedom.