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Simplify Your Finances: Build a Budget

March 23, 2011

I am not a money guru. I am not responsible for any financial decisions you make as a result of this post. These are just my ideas.

I know several people  who can’t manage their finances. Many people don’t know how much money comes in each month. And they definitely don’t know how much goes out each month. They scrape by each week and make large purchases on a whim. (I define large purchases as greater than $100. These purchases are not wrong, but should be made with careful consideration.)

Generally the first step to managing your finances is creating a budget.

Start by determining your expected income on a monthly basis. If you have a job where your income is variable, estimate on the low end. Know how much and when you are going to bring home that money.

Next, list all of your bills and when they are due. These are bills that you receive monthly. Some examples include:

  • Mortgage or rent
  • Utilities (electricity, water, gas)
  • Home and cell phones
  • Internet
  • Cable or satellite TV
  • Car payment
  • Credit card payment
  • Student loans
  • Savings (while this isn’t a bill, it should be a must in your budget)

If your income is higher than your expenses, great! Now stick to your budget, pay off debt, and save money.

If your expenses are higher than your income, then you have to determine which expenses can be eliminated. Pay off your current debt and don’t create new debt (savings vary.) Downgrade your smartphone plan to a standard feature phone (approximately $30/line/m0). Get rid of cable or satellite TV and get Netflix ($40/mo). Don’t go out for dinner as often. Cook at home (savings vary).

These opportunities are easy and can’t put you in a better financial position when you hit hard times. As you save, you will have an emergency fund. When you don’t have savings, stressful situations become more stressful times. When you do have savings, you can handle other aspects of difficult times.

I hope this is helpful. I plan to post more financial positions in the future, so I hope you enjoy these.

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