Budget Planning - Its Elementary My Dear Watson

Does it feel like you have to be Sherlock Holmes to solve the mystery behind balancing your personal budget? Are you living a mysterious thriller where your realization of "financial independence and security" is a vicious repeating cycle of debt? Don't be afraid?...Somehow you've ended up lost in the "plastic zone". ' The "plastic zone" is a scary place. But you're not alone. There are millions of people today living the same mysterious life in the plastic zone. Remember green money? You know, that green paper with presidents proudly displayed on them. They have virtually disappeared from the "plastic zone." Is real Money a foreign object to you? Is the balance of your checking account mysteriously stuck at Zero? It's time to solve the mystery.

You don't have to be a financial wizard to solve this mystery. And you certainly don't have to be Sherlock Holmes. You see it really is an elementary concept. If you ask any elementary school student they'll tell you that you can't take 10 from 5. There can be no negative integers in this equation. Simply put, you can't spend more than you have! You have to fit your "living" within your "means."

For most of us living in the plastic zone, this means making some serious changes in our spending habits. It seems an impossible feat to reduce debt while still building a foundation for your financial security and independence. It Can Be Done! And it is "elementary my dear Watson!"

KNOW WHERE YOUR MONEY GOES!

~The first step is to realize where your money goes. How are you spending it? This requires a little recording keeping but is not difficult. Simply write down every purchase you make, that is not a monthly bill, for at least a week. This includes every check, debit, credit card, and cash transaction made (if married, your spouse must do this also). When finished sort these into appropriate categories to plug into your budget later. For example; dining out, lunch at work, groceries, coffee, gasoline, snacks, well you get the idea.

~Second lets tackle that debt. The monkey on your back will always insist on being fed until you take control of your money and say NO MORE! Make a commitment to stop using the credit. You must make a decision to invest in yourself from now on. Not the credit card companies. Take control by knowing what you owe , what you're paying, and how much it is costing you. Make a list. Include Creditors Name, Amount Owed, Interest Rate, Current Minimum Monthly Payment.

Add up all of your current minimum monthly payments. This is your monthly debt reduction payment for the life of the debt. You will pay this consistent amount each month until the debt is paid in full. Roll down freed up monies from one creditor to the next as accounts are paid. For example: your list of payments include a visa you must currently pay $80 per month. You will make that $80 payment regardless of the minimum due (unless for some reason the payment goes up) until the debt is paid. When it is paid you will take that $80 and apply to another creditors monthly payment. This is the secret to paying them off before you die! And, still have time to enjoy a debt free lifestyle.

~Next, you have to write down regular monthly expenses. Things like the mortgage, cable, phone, electric, car payment,. Any expense that you pay every month. Insurance payments can be included if you pay monthly payments instead of a lump sum. Some of these expenses may not be the same each month ( like the electric bill). You should figure an average monthly amount for these. If your provider offers a budget plan where your payment can be a consistent amount each month, this makes budgeting these bills much easier. So do it!

~Now figure in the variable expenses. These are things like car maintenance, home maintenance, property taxes, income taxes, insurance's that are not paid monthly, pet care (vet bills, and medicines), your family's medical expenses (physician co-pays, deductibles, prescriptions (or prescription co-pays). Go through your financial records and write down every expense you can find that did not occur on a regular monthly basis. When you're done, add the total amounts for the year, divide by twelve, and this will give you an estimate of what you should be setting aside each month to budget these expenses. This is a variable expense monthly allowance to be included in your budget as a monthly expense. You set aside this amount each month (maybe in a savings or second checking account).

This is one of the most important steps in the budgeting process. The one step that most of us forget to do. The biggest budget busters are these "unexpected expenses". They're not really unexpected. Most of us just have a tendency to treat them as if they are unexpected. You don't plan for them. Consequently you will not be financially prepared when they need to be taken care of. You know that the car and home require some level of maintenance, but do you actually have a plan to pay for that expense? Or, when the hot water heater goes up, will you be forced to resort to the help of the credit card companies. This is what they hope you will do. Of course the property taxes have to be paid. Will you have the payment when it is due?

To reduce debt and maintain a successful budget you have to plan for these "variables". If not, you will inevitably use the credit cards to bail out and you'll be defeating yourself. The variable expense allowance in your monthly budget will allow you save for these expenses and will be your defense against creating more debt. This is an essential step in building financial security, investing in yourself, and remaining debt free.

~ Set a reasonable amount for your monthly savings allowance. This will be an emergency fund that can bail you out in case of tragic circumstances such as a serious illness or unemployment. Start with 10-15 % of your income and cut back to as little as 5% if you need to balance the budget. But, do save something! Anything is better than nothing. If you have to start small, as your finances improve, you should increase your savings allowance to reach at least 10% of your income.

Of course, once you have all of these figures in place you may find that you don't have enough money to cover all the expenses. You not alone. I was amazed at how much more I was spending than I was earning. It finally made sense to me why I couldn't get ahead. Why my debt kept increasing no matter how hard I tried to budget. This is when you have to start eliminating unnecessary spending, trimming down expenses by using some money saving strategies, or possibly considering an extra income.

It isn't always an easy process. It depends on how much of your spending is "unnecessary", how much you're paying out for debt, and how much you want to be free from debt and financially independent.

One things certain, if you take control of your money, and are committed to living debt free, you will find success. If you just keep doing what you're doing, things will not change, but will inevitably get worse. You will continue to invest in credit card companies, spending money that you don't actually have, and don't have a plan to pay back.

So start with a good spending plan that cuts out unnecessary spending, reduces monthly bills and expenses to the bare minimum, and eliminates credit card use. Save money in every area of your budget. Remember, $10 a month doesn't sound like a lot. But, a savings of $10 per month is $120 per year that you can apply somewhere else in the budget.

Every dollar you free up helps bring the budget into balance. Helps you live within your means. Don't spend more than you have. It doesn't get any more elementary than that!

Good Luck and Success! Live Debt Free to Be Free. You Deserve It!

Cheryl Johnson is a mother of four helping herself and others become and stay debt free. Publisher of Simple Debt Free Living at http://www.simpledebtfreeliving.com - A self-help plan, ideas, and resources for debt management, household budget planning, frugal and debt free living. Money saving tips for groceries, bills, clothing, weddings, gifts, and much more. A money saving tip a day keeps the credit card away!

In The News:

5 Best Online Banks of 2021-2022  Waco Tribune-Herald
Readers Share Tips for Raising Money Smart Kids  Kiplinger's Personal Finance

Knowing Me, Knowing You: Why ID Protection Plans Are Flawed For Fraud

ID theft is a major consumer concern, though there is... Read More

Developing a budget? Watch out for Those Budget-Bursting Gremlins

If you've developed a household budget to get your spending... Read More

How To Place an Online Order for Checks ? It is Easy as 1-2-3

If You Have an Existing Account and 5 Minutes, You... Read More

Kundalini Lessons - Money

I've been going through and interesting growth period lately that... Read More

The Origins of Check Writing

People haven't always written checks to buy goods and services.... Read More

How to Choose the Right Bank for Your Online Business

You should thoroughly consider your business needs when selecting a... Read More

Bank On It: Places to Hide and Invest Money

Today I passed a thermometer at a bank that read... Read More

7 Simple Ways To Save Money

Each of us knows how to spend money, but do... Read More

Basic Bank Accounts Failing the Basic Needs of Consumers

The lists of bank and savings accounts that are available... Read More

Resources to Help You Learn About and Protect Yourself from Identity Theft

There is a new bill that is being passes, it... Read More

Simple Ways to Save Money

Things are so expensive these days. We seem to be... Read More

When do You Need a Financial Management Company on Your Side?

We live in a crazy world. Someone ought to sell... Read More

Improve Your Professional Image Using Address Labels

One of the simplest ways to improve your professional image... Read More

Top 10+ Ways to Jumpstart your New Year?s Finances!

Of course, these don't have to be done in any... Read More

Avoiding A Nightmare On Renovation Street

You've decided you want a bigger, better and more desirable... Read More

Personal Finance ? Why You Should Compare, not Despair

Sorting out your personal finances can be a tricky and... Read More

Banks Are More Than Just A Place To Park Your Money

If you've been to a shopping mall lately, you've probably... Read More

Budgeting is Essential for a Single Mothers Success

Today many women are struggling with debt and it's even... Read More

Save Money on Gas

Gas prices have soared to unimaginable heights of late. Since... Read More

Five Secrets for Long-term Financial Success

Future financial success is not a guarantee that any one... Read More

Planning Ahead with Your Finances

If you, like most people, have not seriously considered what... Read More

What Happens if You Die Without Making a Will

If you die without making a Will in the UK,... Read More

Learning the Basics of Handling Money

With prices increasing all the time, saving money can be... Read More

I Want to Buy a Home - Now What?

If you were to ask 100 women "What would you... Read More

Strategies for Success

Holy Shenanigans! More STUFF?Loosing one's business due to lack of... Read More