Download Budget Your Money

How to Budget Your Money
Edited by Stuart Langridge, Imperatrix, Ben Rubenstein, Bicase and 110 others
A budget is like a bra. It feels weird the first couple times, but once you get used to it,
you're glad it's there. (Fellas, think "jock-strap.") In fact, a budget can help you crush
your outstanding debt, get ahold of your financial future, and even make you a happier
person in the process. And best of all, it's really not that hard. Here's how to start the
path to financial freedom. Onward and upwards!
TASK
In groups of four, read the advice on how to budget your money
and avoid an overdraft.
Make a list of all the vocabulary you can find in your part of the
text that relates to money or personal finances.
Write it under the corresponding list:
VERB
NOUN
Part 1 of 4: Tracking Your Income and Expenses
1
Determine your overall income. Are you on a fixed salary where you know for
certain how much you're taking home each week? Are you a freelancer whose salary
varies each month? Having a rough idea of how much money you can expect to earn is
key in creating a successful budget.
2
Identify how you're spending money. What are the bills that you have to pay every
month? Do you go out to dinner with friends every Friday night or go to the movies once a
week? Looking at where your money is going will give you a better handle on tracking it.
3
Compare your regular expenses with your paycheck amount. Do you get a
negative number? If so, you are living way beyond your means. If you have money
leftover, split that money up into a few groups:
Part 2 of 4: Creating Your Budget
1
Set budget and financial goals. These should be short-term and long-term. It
often helps to have something to be working towards to help stay on track with your
budget. For example, if you want to save for a house, it helps to have that goal on your
radar.
2
Make a list of what's absolutely essential that you pay for. These include
essentials like rent or mortgage, electricity and heat, food and diapers, for example.
Add all these items up and see how much of your monthly income is left after you
account for the bare necessities.
3
Begin budgeting out the rest of your discretionary spending. This part of your
budget is all about identifying values. What values do you have and how do you want
to spend your money to realize them? Money, after all, is a means to an end, not an
end itself. Money are you going to use money to make it truly work for you?
4
Use software to help you budget. Personal finance software is quickly
becoming a new trend in finance. These programs have built-in budget making tools
that can help customize your budget, along with analytics that help you project cashflow into the future and better understand your spending habits. Personal finance
software includes:
Part 3 of 4: Becoming a Budget Pro
1
Don't go over budget. The first rule of budgeting, and pretty much the only one.
It sounds fairly obvious, but it's easy to go over budget even when you have one in
place. Be mindful of your spending habits and what your money is going towards.
2
Keep a journal. In the early stages of keeping a budget, it might be helpful to
keep a daily journal of your spending habits. Write out what you spend money on each
day. It could be eye-opening to track some of your expenses. Keep an eye for repeated
purchases which might be easily avoidable, like a trip to Starbucks for coffee every
morning.
3
Know the difference between luxuries and necessities. Determine what the
have-to's in your budget are versus the want-to's. Make the necessities your highest
priority in the budget and if there's money left over, indulge in things like going out or
shopping.
4
Reduce larger expenses. These are often the most unpleasant, but most
effective ways to stay within a budget. If you take an annual vacation, consider staying
home this year.
5
Leave your debit/credit card at home. When you're out for the night, it's very
easy (and tempting) to leave your debit or credit card at the bar and ring up a tab.
Don't! This is a very easy way to ring up a high bill that will set you way off budget.
Part 4 of 4: Making Your Budget Go Further
1
Cut your taxes. This usually means taking better advantage of itemized
deductions when you file your taxes every year. Start keeping your receipts, especially
if you're an independent contractor, and research ways get a better refund.
2
Appeal your home assessment. If you're a homeowner and have sufficient
evidence, you might be able to cut your real estate taxes by challenging the value that
a home assessor puts on your property.
3
Stay ahead of inflation. Over time, inflation raises the cost of living. A three
percent rise in prices annually doubles the cost of everything within 24 years. If your
income starts to rise, don't start spending it on luxuries until you've made sure that you
can stay ahead of inflation.
4
Don't count on windfalls. Don't factor in potential sources of revenue such as
year-end bonuses or tax refunds. You only want to include guaranteed money into your
budget.
5
Take your money out for the week at once. If you only want to spend $250
each week, go to the ATM on Monday and take it all out then. Once you run out of the
money for the week, that's it.