Budget Basics – What is Budgeting?

November 10, 2011 By Cricket

Is BUDGET a ‘bad’ word in your vocabulary?

For most people, the word “budget” conjures up thoughts of penny-pinching and the unpleasant task of crunching numbers. This couldn’t be further from the truth. A budget is the cornerstone of a solid financial foundation, regardless of your situation, and it isn’t that hard to do.

What is a Budget?

A budget is nothing more than a breakdown and plan of how much money you have coming in and where it goes. Could you imagine a business becoming successful if it didn’t keep track of its income and expenses? The same holds true when it comes to your personal finances. If you don’t know how much money you have coming in and where it goes, your road to financial success will be a difficult one.

The biggest fear that most people have when creating a budget is that they will need to suddenly cut back on all of the fun spending — things like the occasional coffee or dinner out, movie night, or even the trip to grandma’s for the holidays. While you may find that you do need to cut some spending after putting together a budget, without actually sitting down and creating one, it is impossible to know what expenses need to be cut, if any.

Tracking Income

The first step in creating a budget is to determine how much income you have. This is quite easy and typically only requires you to take a look at your pay stub. Of course, if you’re married, be sure to include your spouse’s income as well. In addition to your regular pay, you’ll want to also include any other sources of income you may have, such as dividends, interest, a side business, and so on.

Tracking Expenses

Now that you know how much income you have coming in, it’s time to take a look at your monthly expenses. Start with the regular and fixed payments you have, such as your mortgage or rent, car payments, insurance, debt and taxes. For most people, these are going to be relatively fixed, meaning you can’t easily change the amount that is due each month.

After you’ve listed your fixed monthly expenses, it is time to dig deeper to find out where the rest of your money goes. Take out your checkbook or pull your latest bank statement to help you with this step. Jot down how much you spend on things like utilities, groceries, entertainment, subscriptions, and so on. This handy worksheet can help you with keeping track of expenses.

The Bottom Line

You should now have all of the information needed to help you create your budget. So, go ahead and total up your monthly income and all of your monthly expenses. Subtract your expense total from your income total and you’ll have either a positive or negative number. If you have a positive number, congratulations, you are spending less than you earn. Don’t worry if you have a negative number. The whole reason for creating a budget is to identify deficiencies and find out how to address them.

Now that you can visually see how much you fall short, you can adjust your spending or saving in certain areas to improve the situation. Oftentimes you’ll realize that by just making a few small adjustments to your spending habits, you can significantly improve your situation. Maybe this means cutting back on one of your magazine subscriptions, eating out one time less a month, or even just hitting the matinee instead of the prime time movie. Typically, just saving a few dollars here and there can be enough to not only make sure you spend less than you earn, but also apply a few extra dollars to things like high-interest credit card debt or your retirement savings.

 

 

Filed Under: 6 month money challenge, Asset Building, Budgeting, Family finances, Holidays and money, Southern Indiana Asset Building Coalition, Uncategorized

Movies and Money

May 22, 2011 By Cricket

So this weekend, while flipping channels, I stumbled upon a great flick, ‘Confessions of a Shopaholic’ starring Isla Fisher and Hugh Dancy. I had seen it before and quickly remembered how much I liked it the first time. There are many reasons. Of course, each time you revisit something meaningful to you, the likelihood is great that you will gleen something new from it.

This turned out to be true for me with this cute and sentimental chick flick. I related very well to Rebecca, whose own financial situation seemed grim yet she found herself taking a job writing about finances. She seemed to be completely out of her element. I can relate.

Now that I have started to write for the Southern Indiana Asset Building Coalition, to be honest, I have felt like a fish out of water. Budget? Savings? Balance? No way! Not me. You might be horrified to see my checkbook or all the receipts sticking out of my purse.

But this movie reminded me of something really important. There are reasons we spend the way we do and there are actions we can take to do something about it. The fictional character of Rebecca Bloomwood had a deep affinity for spending. She got her self-esteem from pretty, new things. In the end, she realizes that she doesn’t need new things to feel like a capable, bright person. She just IS one!  She was smart about money and she didn’t even know it! She comes to terms with her spending habits and makes specific, strategic moves to a different financial path. She goes from freezing her credit cards to getting help from a Shopaholics Anonymous group!

This movie is chock full of gut-wrenching moments I have lived through, like persistent debt collectors and spending money I do not have to the moment when there is no where else to run. I may not be able to relate to investment portfolios or hedge funds, but trying to balances my wants and needs, that I can understand. This movie inspired me to take a look at other films that might help open a dialogue for the SIABC BLOG readers…that is my favorite thing about movies when they entertain AND compell me to dig deeper! So from time to time I will post about them.

So grab some popcorn and check out the movie trailer here: Confessions of a Shopaholic and stay tuned for more Movies and Money

Filed Under: Budgeting, Financial challenges, financial counseling, Financial Stability, Southern Indiana Asset Building Coalition

A lesson learned

May 20, 2011 By Cricket

Guest post by Kenny Smith

My 16-year-old daughter opened up a checking account a couple weeks ago.  It’s a free account for children ages 13-17 whose parents have an account with the bank. 

She had done a little work for our church and received her first official paycheck – meaning taxes were taken out.  It wasn’t a lot of money, but a start.

 She said she opened the account because she thought it will help her save some money.  But then that debit card came in the mail – $5 at Starbucks, $10 at Target, $20 at Old Navy $30 eating out and just like that her account had a few dollars left.

She said with the debit card it wasn’t even like she was spending money – she was just giving them a plastic card.  Statistics prove people spend more when using a card vs. cash.  It’s harder to let go of that cash.

Many financial experts suggest using the envelope system and paying cash for everything.  I’ve talked to some people who have tried it and they found themselves spending about $60 less per week.  Check out Dave Ramsey’s advice from www.DaveRamsey.com  for using the envelope system or contact SIABC for help.

 http://www.daveramsey.com/article/dave-ramseys-envelope-system/lifeandmoney_budgeting/

Filed Under: Budgeting, Family finances, Parents and teens, Southern Indiana Asset Building Coalition, Teens and money, Uncategorized

4 Steps that you may take to set up a good budget

May 1, 2011 By Cricket

SIABC Welcomes Jason Holmes as a guest blogger. Jason is a contributing writer to several other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations.

If your financial situation is deteriorating due to rising debts, then it is time you choose from various debt solutions that will be able to help you out of this situation. A debt solution is a solution that helps you come out of your debts with ease. There are many debt solutions that you may choose from. You must remember that the choice that you make should be based on your financial situation. However, it is also important to consider various other alternatives to coming out of debts. You may try various other options rather than considering traditional debt solutions.

 One such way in which you will be able to control your debt situation and you will be able to stay out of debts is the formulation of a budget. A budget that is made accurately will help you in finding out where your money is going and how much you are spending. Thus, you will be able to regulate your finances better and will be able to save enough to pay off your debts.

 Some simple steps that you may follow in order to set up a budget are as follows:

 1. Categorizing your expenses: You are to take down every little expenditure that you do. These expenditures should be recorded under different categories. There are two different types of expenditures that you are to put in your budget. They are variable and fixed expenses; in case of fixed expenses the expenditure is constant every month. In case of variable expenditure the expenses keep on fluctuating. Recording all your purchases and expenditures is very important when you are formulating a budget. As the expenses are put in categories you will be able to see clearly how much you are spending and where you are spending. Thus, you will be able to control your expenses.

 2. Calculating your total expenses: You are to then add up all your expenses together in order to find out how much you exactly spend in a month. This presents to you clearly how much you are spending in one month.

 3. Totaling your income: You are to now total your income. Income here does not only include your monthly salary but also the money that you earn form investments and your fluctuating income. Try to include all possible earnings that you have in the budget and total your income.

 4. Finding the net income: The next step is to find out your net income. This can be found by subtracting your total expenditure from your total income. This is the amount that you will be using in order to pay off your debts.

These are the steps that you may follow in order to formulate a good budget and get out of debts.

Filed Under: Asset Building, Budgeting, financial literacy, Financial Stability, Southern Indiana Asset Building Coalition

6 Month Money Challenge

April 19, 2011 By Whitney

In honor of National Financial Literacy Month, SIABC has launched an online 6 month money challenge  designed to help you examine your beliefs, feelings and attitudes about money as well as evaluate your relationship with the beloved dollar!

Join us on Facebook and you’ll find weekly CHALLENGES focused on a particular financial theme!  You’ll have access to the tools, information and resources you’ll need to help you change your behavior and create habits that support your financial goals. 

We kicked off the challenge in April on Facebook with a focus on spending but it’s not too late! Jump on in and let SIABC help you reach the finish line of a great financial future!

 Monthly Challenge Topics:

1.  SPENDING

 2.  BUDGETING

 3.  Debt

 4.  Credit

 5.  SAVINGS

 6.  Organization

Click here to Join us on Facebook!

Filed Under: Budgeting, Financial challenges, Financial Stability, Southern Indiana Asset Building Coalition