Key Reasons for Managing Your Budget - You Have Limited Income: Virtually everyone has limited or fixed income. Without budgeting you are being controlled by your environment. If you have a plan, you are more in control of your money. Without a budget, you may not really know you are spending more money than you are earning. - So That You Know Your Limits: Knowing what your monthly expenses are projected to be and what they actually are will help you keep track of how much money you have left over for future goals and needs. - You Have Unlimited Demands: There is an endless demand on your finances. Our commercial capitalistic society is constantly calling out for you to buy. If you have minor children, the demands are greatly increased by the things that they want, the activities they are in, and the schools they attend. - You Want Freedom Not Bondage: Budgeting seems to be restrictive to some people. The reality is that we have to make choices between what we want at the moment and our regular bills and goals for the future. However, there is freedom in knowing what your limits are. Many people find this liberating, because it creates the opportunities to grow and mature. - You Have Future Goals: If you are sacrificing today, it helps to know what you are saving for in the future. Obtain a financial plan so that you will know what your goals are and for what you are saving. - You Want to be More Aware of Where Money is Going: If you do not have a budget, you may have no idea where your money is going. Knowing where you money is going will help you identify if you are spending too much money in specific areas. - You Want Less Stress: Spending without a plan and a budget increases your stress because you do not have a well thought out plan for paying your bills and you may spend more money for fun than you can afford. Planning and budgeting will give you the peace of mind that you are on the right track. Contract with Yourself (and between Spouse) Budgeting is very hard for many people; therefore, it helps to have a contract with yourself. If you are married, this agreement should include your spouse. If you work together, you will usually accomplish more than you could on your own. I hereby resolve to: 1. Start a budget, and pay attention to it weekly and monthly 2. Not spend more money than I make 3. Be in financial partnership with my spouse with no secrets between us 4. Not borrow to purchase items that depreciate in value 5. Not let my emotions make me purchase anything, including gifts 6. Not purchase something over budget unless it was unavoidable 7. Not purchase anything that I don't really need, no matter how good the sale is 8. Not purchase something to keep up with the Joneses 9. Not apply for any new credit cards, unless lowering interest rates 10. Pay off all credit cards monthly (I will work toward paying them off) 11. Not spend money on fun things unless I have paid my monthly bills 12. My spouse and I will both be the "fun police" 13. Include children in the budgeting exercise to teach restraint 14. Not obtain high maintenance items like a pet or hobby if I can't afford the expenses. 15. Not buy something that costs over $50 without consulting each other and the budget Cash Flow Management Checklist In addition to having good budgetary habits, it also helps to take advantage of money-saving measures. The following are many of the things you can do to help you save thousands of dollars per year. - Employ tax advisors to you avoid overpaying taxes - Use low cost investments that have low to no commissions, fees and expenses - Shop your loans to find lowest interest rates - Shop your insurance for the lowest prices possible. - Buy smaller homes and cars since they require less money to maintain and insure - Go on cheaper vacations - Frugal travel to lower the already large consumption of your income for gasoline - Eat out cheap, less often and at less expensive establishments and cafes - Spend less on food by shopping at low price grocery stores and pack your lunch - Lower home energy consumption by employing easy to find and low cost solutions - Break smoking and excessive eating habits to save on tobacco and fast foods - Monitor emotions to avoid depression or stress related purchases - Obtain from the library resources about budgeting, financial planning and spending - Go to the library for entertainment books and DVDs - Reduce or eliminate cable TV Budgeting Tips Use technology or spreadsheets: Obtain software (or use spreadsheets) that will help you pay bills and make and monitor a budget. Devote time to it by keeping track of all expenses and enter them into your software program or monthly spreadsheets each week. Save all receipts, bills, household documents, and tax documents: Organize these items by category into an accordion file or drawer: e.g., auto, bank, business, credit cards, dental, medical, grocery, income, insurance, mortgage, utilities, general receipts, school information, and taxes. Balance your checkbook: It is amazing how few people balance their checkbooks monthly. Budgeting software makes reconciling simple, but you can read the back of your statement or make an appointment with your banker if you need to learn this skill manually. Tax Time: If you use budgeting software, you can run a tax summary report before you work on your taxes. If not, and if you itemize your taxes (Sched.A), you must total the appropriate columns in your spreadsheets, e.g., Medical expenses (Your accountant may provide you with an organizer to help you get ready for tax time.) Remember to place quarterly and yearly expenses on the appropriate month in your budget so that you do not overspend. For example, annual insurance payments, quarterly tax estimated payments, annual homeowners association dues, etc. Summary Good cash flow management is key to implementing any financial plan; commit to doing this well. No one likes self-discipline, but it is actually good for us. With proper management of your finances, you will become more confident and less stressed about your future. Remember, one bad financial decision can sometimes take years to undo. Be very careful with all decisions you make.