Feb

28

Get A Grip On Your Money

Posted In: Personal Finance

Do you know where you stand financially? Most people have an idea, but they rarely see the whole picture. Your budget shouldn’t be like a jigsaw puzzle with missing pieces. You can’t get a grip on your money unless you see where it’s slipping away. Those missing pieces could be hidden spending habits that are preventing you from reaching your financial goals. So, how do you get a grip on your money?

First, get your financial records in order.

Start with your income. Take your last pay stub for December, and/or your W-2, and break your income down into monthly segments. Don’t include commissions or bonuses because these change from month to month. If you’re paid strictly on commission, take the lowest monthly figure from last year and use that as your monthly estimate. Most expenses are billed on a monthly basis, and if you overestimate your monthly take-home pay, you could come up short.

Next, list your expenses. Start with expenses that are billed monthly, then search for expenses that are billed annually or bi-annually, like your driver’s license renewal, car registration, or long term care insurance. Finally, try to estimate your cash expenses as closely as possible. Your cash expenses are categories like groceries, restaurants, clothing, or gifts. They fluctuate from month to month, and can be hard to track.

Second, put your income and expenses together.

If you’re having trouble adding up your expenses, then search online for a budget spreadsheet. There are quite a few available. Search for one that works for you and can be downloaded for free. Then, simply enter your income and expenses and the totals will calculate for you.

With the totals in front of you, you can see whether you have more income or more expenses. Don’t be embarrassed if some of the expense or income categories are less than ideal. Remember, this is for you to you see. You don’t have to share the information with anyone else.

Third, make changes to your budget.

People who are successful financially make budget changes throughout their lives. This allows them to achieve new goals or adjust to new circumstances. So, yes, you will want to make changes. You want to have some give between your income and expenses in case of emergencies. You also want to work towards your greater financial goals.

Now that you have all the pieces of your financial puzzle, you can make realistic decisions about your budget. Usually people have this “ah ha!” moment when they see the whole picture. It’s not unusual to be surprised by the fact that your income is bleeding away on cash expenses or high utilities. Seeing the whole picture allows you to make informed decision and will motivate you to make positive changes.

Finally, continue to focus on your goals.

Personal budget cuts are “positive changes.” These positive changes are inspired by your long term goals. What do you want to accomplish with your finances? Do you want to plan for retirement, build an emergency savings account, or pay for your child’s college education? Think about it. Goals are important. In order to make budget cuts, you need to feel good about what you’re giving up. Getting a grip on your money may sound negative, but it’s really the first step towards a great future.

About the author: Jill Russo Foster is the author of Cash, Credit, and Your Finances: The Teen Years. She provides practical tips for every day finances. Learn more about protecting your credit and living within your means, with Jill’s popular free reports and bi-monthly ezine, available here ==> CashCreditandYourFinances.com

Article Source: Get A Grip On Your Money