The Beginners Budget

Good Afternoon,
It's Thursday which means it's almost Friday which in turn means it's almost the weekend which is what I have been looking forward to since Tuesday morning at 6:45 A.M. Here is the oh so important budget entry as I promised yesterday. Enjoy!

In my humble but in this case probably correct opinion, budgeting is one of the most important factors in achieving financial success. There are many ways to keep track of your money but the key aspect is finding a system that will best fit your needs and personal record keeping style. A budgeting system only works if you stick with it and continue to use it. I'm sure there are many of you who have made an attempt at keeping a financial budget in the past but much like Shaquille O'Neal's musical career, it didn't last long. But alas, unlike the latter there is still hope for you and your budgeting dreams. I will guide you through the entire process as I have done it myself. Please refer to the example below as a reference to the guide. If anyone has questions please feel free to e-mail me and I'd be happy to give whatever knowledge and guidance I can.

1. Pick a starting date
Obviously, the 1st of the month is usually the best time to start, but if a new month is a ways away I would highly recommend getting started now, so when the 1st comes around you will be ready!

2. Find a System
The advance in the software and availability of computers has made the options for computer-based financial tracking almost limitless. All you have to do is find what works for you. Microsoft Money, Intuit Quicken, and a plethora of other financial programs are available for very reasonable prices. I have tried a good portion of these programs and although they had some very cool features they didn't allow me to customize the program enough to my record keeping style. You can use any of these programs or you can choose to do what I did and create your own. I keep track of all of my investments, bank accounts, and credit cards using a system I created in Microsoft Excel. With a little Excel prowess you can create a very efficient and inexpensive way to keep track of your money. If you don't have Microsoft Excel, Sun Micro Systems has created a great Open Source program called "OpenOffice." It's totally compatible with Excel, and there are few differences that I have noticed and best of all it's free.

3. Estimate
If you're using Excel you're going to have to create an estimate of about how much you spend in each category every month. Every ones categories are going to be different, which is what makes the custom budget program such a beautiful thing. To the best of your ability enter what you think you will spend in each group. Keep in mind it is important that you make reasonable budget goals that you can actually achieve. Always remember to set your budget for a four week month. There are four months out of the year that there are five pay periods in a month (If you are paid weekly). Utilize these months to put extra money towards paying down debt or to put towards savings. Don't forget to keep track of both incoming and outgoing money! Check out my sample for a good starting point if you'd like!

4. Adjust
As you progress through the month you will obviously have to be flexible and make reasonable changes to your budget. As you find yourself spending in certain areas more or less than you thought, you can choose to do one of two things. Increase the allotted amount for that area, or if you believe that the amount you have provided is substantial enough you may choose to simply spend less money. Which of course is always OK.

5. Create Goals
By what date do you want to have your credit card debt paid off? How much per month are you going to need to pay on them to accomplish that goal? How much do you need to save to take that vacation in the Bahamas you've been dreaming about? Setting goals for yourself is extremely important. It provides motivation and will keep you on focused on maintaining your budget. Once again, if you take a look at my sample that I provided you'll see that I have very short term, mid term and long term financial goals listed. Keep track of how close you are to accomplishing your goals and reward yourself for getting there!

6. Create a Habit
The best way to keep consistent and accurate records is to get into a routine of using your budget system. I use my Chase bank card for almost every purchase I make. It has worked so well for me because with a few rare exceptions, all purchases show up immediately on Chases' personal banking website. Just in case, I keep all of my receipts for the day in my wallet. Every night before I go to sleep I open up the Chase website and enter all of the money I spent that day into the spreadsheet. If there is any feasible way to have a point at which you can do this it will make it much easier on you and soon after you won't even have to think twice about it.

7. Keep records
The best part of budgeting is tracking your progress. Being able to watch how far you've come gives you a great feeling of success and will provide you with the drive to keep doing it.

I hope this beginning guide is helpful and as I said earlier please feel free to e-mail me with questions as I would be happy to provide one on one help. Good luck!