Financial freedom cannot be achieved without budgeting. Budgeting involves tracking your sources of income and more importantly tracking your expenses. It is novel tool for controlling your expenses and making you aware of how you spend your money. At the outset, budgeting may seem to be onerous and boring, particularly for those of us who hate numbers. But once you realize the benefits emanating from it, you will find it an interesting exercise. Even businesses, whether small or large, use budgeting as a tool to achieve their financial goals. It is, in fact, an integral part of managing an organization.
Benefits of budgeting:
Helps to control impulse buying.
Helps to control your expenses.
Ensures that you pay your bills on time.
Helps you to borrow money when you need it.
Helps you by not defaulting on your loan repayments, thus, protecting your credit rating.
Helps you to save money which can routed to different investment vehicles that can in turn help you build your net worth over a period of time.
The budgeting process
The first step in the budgeting process is to determine your net worth.
Your net worth = the value of all your assets less all the liabilities or loans that you owe.
The second step is to identify your sources of income and the amount from each source. Your sources of income could be salary, business income, investment income such as dividends, interest, rent. Your most recent tax return and bank account can be an excellent source for identifying your income sources.
The third step is to identify your expenditure items such as groceries, entertainment, mortgage payments, loan repayments, housing repairs, transportation, taxes.
Prepare a spreadsheet with the following columns: a) description for each item in the two sections viz. income and expenditure b) actual amount c) budget amount d) difference (between actual and budget amount) e) reason to be given if the actual amount exceeds the budget amount.
It is very important to ensure that you provide at least 10% of your gross income towards savings. A formula should be in place in your budget spreadsheet that will automatically calculate 10% of your gross earnings. The objective of budgeting will be defeated if it does not lead to targeted savings.
Budgeting should generally be done on a monthly basis. It is very important for you to enter all the amounts that you spend into the spreadsheet. This will require a disciplined approach but in the long-run, it would definitely be worth it. Keep a separate paper file for each year divided into sections based upon the items of income and expenditure for filing your bills.
Read More Free Investment, Wealth Creation & Personal Finance Articles & Tutorials at: http://www.global-investment-institute.com/
The Global Investment Institute has been setup to aid people in the pursuit of a better lifestyle through managing their money effectively, investing wisely and wealth planning for their future.
Wood Dale Chicago prom limo .. Lockport Chicago limo O’Hare1. Don't focus on your finances.The reason most people get... Read More
Are you a check fanatic? Don't worry, you aren't alone.... Read More
The price of gas continues to climb, and with continued... Read More
To save on food, be an opportunist. Buy what you... Read More
Can you really afford a house? If so, how much... Read More
Have you seen the recent article on a new "green"... Read More
An avid cyclist and bike racing fan, I sit transfixed... Read More
Are you having problems with debt? Are you afraid to... Read More
Super-mumsIt seems that the proof of maternal efforts is no... Read More
We live in a crazy world. Someone ought to sell... Read More
Reducing the clothing budget was a serious challenge for me.... Read More
People haven't always written checks to buy goods and services.... Read More
You've decided you want a bigger, better and more desirable... Read More
During the last twenty years, banks have offered a number... Read More
With prices increasing all the time, saving money can be... Read More
Your food budget is the most flexible area of your... Read More
As a parent you are bound to face a few... Read More
It is crucial as an individual who is striving for... Read More
Before buying personal or business checks you should inform yourself... Read More
On the other hand, there are those people who are... Read More
The recommendations for military base closings have been released and... Read More
It's the little things in life that make it interesting.... Read More
One of the biggest challenges facing black RELATIONSHIPS today are... Read More
The first step to financial success lies in knowing your... Read More
We have heard a lot about consumers' personal information getting... Read More
Antigo wedding limo ..So, you've made the decision to apply for a credit... Read More
The judge had to ask the question, and we had... Read More
At a time when the entire world's attention is focused... Read More
Here are ten steps you can follow to help improve... Read More
Ever wonder where address labels come from? Avery? is perhaps... Read More
Most Americans have been brought up to be concerned about... Read More
Financial freedom cannot be achieved without budgeting. Budgeting involves tracking... Read More
Many don't realize that our basic utility bills provide the... Read More
Between 15 - 20% of people in our country (UK)... Read More
Would you know what to do if you suspect that... Read More
With almost two thirds of university entrants from England and... Read More
The first step to financial success lies in knowing your... Read More
Recent findings from the Educational Policy Institute indicated that the... Read More
Are your financial muscles well toned and healthy or flabby... Read More
Are you having problems with debt? Are you afraid to... Read More
Frugal living is more than a lifestyle. It's a passion.... Read More
It is crucial as an individual who is striving for... Read More
If you were to ask 100 women "What would you... Read More
It is estimated that we, as consumers, waste an average... Read More
Now there are ways to save money in the grocery... Read More
Traditional checks probably won't disappear anytime soon, but processing checks... Read More
For months, we were trigger-swipe happy, putting our groceries, clothes,... Read More
There is a new bill that is being passes, it... Read More
Finding a stable and secure income that will come year... Read More
Vacations Made Easy: Buying a Florida Investment PropertyA relaxing beach... Read More
Personal Finance |