The Beginning of a Budget
February 5th, 2008 | by rachel |
Without question, a written budget is one of the most useful tools available for managing healthy finances. Creating a budget is a process, however, that demands patience and flexibility. Budgets are extremely personal and unique documents. Their creation and management is only effective when they contain accurate information about the specific finances they relate to. If you are creating a budget for the first time (or re-creating a budget after having let your last one slide), take time to gather the information necessary to make it the kind of document that is relevant, accurate and useful for all areas of your finances.
There are hundreds, if not thousands, of budget formats to choose from when creating a personal budget. In fact, there are so many different kinds of budget forms available that it can be distracting. It is very easy to get caught up in the way the budget looks instead of what the budget says. For now, put the budget form out of your mind and pay attention to the content that the budget will hold.
When starting the budget creation process, here is the information you should have available:
- Gross and/or Net Income from all sources
- Timing of pay periods (weekly, bi-weekly, monthly, quarterly, etc.)
- List of fixed expenses (housing, car payment, alimony, etc.)
- List of variable expenses (food, gas, parking, clothing, travel, entertainment, etc.)
- List of irregular expenses (insurance, car maintenance, licenses, school expenses, etc.)
- Due dates of payments
In simplest terms, a budget is a plan for spending money during a given period of time. When created and implemented correctly and consistently, there is no reason for it to be limiting in any way. Using a budget does, however, require commitment. It requires commitment to the process; commitment to the information; and commitment to the goals/priorities that you set for your finances. At the beginning of your budget, get the best information available to allow you to make it a document you can use for a long time to come.