Budgeting Secrets The secrets to making a financial budgeting plan is far more than the practical steps you take (although we'll get into that later), but rather it has to do with your mindset and determination to get the job done once start it. It's like having the discipline to go on a diet. Research shows that most diets will work if a person sticks with it, but the majority of people just dabble a bit here or there before they quit and gain back their weight, or go on to the next diet fad, deceiving themselves into thinking they're doing themselves some good. When smoke clears though, most are right back where they've started from, needing to lose just as much weight, if not more, than when they started their diet. That's the same with a budget. A budget, when put together correctly, is very simple to follow, the key is to stick with it long enough to see your debt paid down and starting to be able to put money away to build up your wealth. If you stick with anything long enough where it becomes a habit, then it's no longer work like it was when you first started doing it, where you had to interrupt the way you were living in order to make some painful changes. With that in mind, let's look at the basics of budgeting, as it's really easy to get into and set up, and if you have the discipline to stick with it will pay you great dividends and become a way of life your really don't think about after you get going, but is just part of the way you live. Budgeting: Where to begin? First of all, to launch a financial budgeting program for you and your household, you need to know the monthly average you pay out in bills and responsibilities before anything else. So take about 4 or 5 months of your recent payments and add them up to see what the average you pay out monthly is. You want to know exact, so don't trust a personal estimate without doing a little bit of number crunching. It's easy to lie to yourself of vastly underestimate your monthly bills. The only way to get it right is to take out your bills and write them down and add them up. You can use some good budget software or budget spreadsheet which you can find free in most cases, and may already be on your computer. If not, look for some budgeting software online and you'll find something very quickly, again, some of it is free. If you're familiar with Google you could use their free online spreadsheet if you choose. Monthly Income The second step is to now find out all your sources of income on a monthly basis. This is as simple as writing down what you make at work, or any other source of income you may get and can count on monthly. This is done to find out the real condition of your finances so you can work on developing a plant to pay down your debt and invest to build up your wealth. It also will tell you whether you need to get additional income to help pay down your debt sooner, or where you may need to or are able to cut back. Monthly Expenses Next, make a list of the fixed monthly expenses you looked at earlier, then add to that the variable expenses you have which you may incur on a quarterly or yearly basis. For example, payments and taxes related to getting your car license renewed every year, etc. Also look at anything you may need to fix in your home or anywhere else for the next year. At minimum estimate what that will be and included in your list for monthly costs once you figure it out, as it's real money you'll need to use, and as part of your budget you can set it aside to have it when needed, rather than just add more to your debt. Fixed and Variable Expenses Now take the variable and fixed expenses and list them in two different categories in order to get a good feel and look at your financial obligations over the next year. Many people give up on budgets at this stage because they don't take into account the fact they have to have other expenses which aren't fixed, but yet can be predictable once you know what your goals are for the year. It's when you have needs you don't account for that you can get discouraged and quit your budget, so be sure to include any type of big project you want to tackle, or need that must be taken care of in your budgeting strategy. Setting a Budget At this time you're getting close to setting your budget and understanding your personal financial health. Now just add up the fixed and variable columns you put your figures in to find out where everything stands and where you need to go from there. Adjusting Spending to your Budget The next step will be your toughest one, as whatever you do, it'll lead to some type of adjustment and lifestyle change, as anyone that does this honestly will recognize they can't go on living this way without being over their heads in debt for the rest of their lives. In other words, you're coming to the priority part of budgeting, and that's where the change and potential pain will come in, because you're going to have to cut back on something somewhere, or figure out other ways to generate a larger monthly income to make ends meet. You must decide, and that's going to involve give and take somewhere in the mix. What is particularly empowering in circumstances like this though, once you've made the changes, is when you get past the grumbling and shock stage, you actually start adapting nicely to the changes, and you find it's not as hard as you thought and becomes the new way of life for you. This is an empowering feeling and it's very real. 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When you start to see your debt go down once you start budgeting from having extra money to do that, you'll start to feel very good about yourself and your financial circumstances, and it'll make you even more determined to stick with it for the long haul. The best way to do this for personal encouragement is to take the card you owe the least on and start paying that off so you can see immediate results. Some advise paying off your credit card with the highest interest rate first, but that can also be the most you owe on a card, and the long time it takes to pay that down can be discouraging. What you want to do with a budget is make it lasting. So taking steps for immediate gratification and results is important. Either way works though, if you have the understanding and discipline to pay off the larger interest card first and still stick with it. Monthly Budget Checkup Finally, the last step is to give your budget a monthly checkup by going over the numbers at the end of that month or beginning of the next month. This is to keep up with the positive results and to check if you need to do any changes to what you're paying down or may need to do if you happened to miss something when setting the budget up. From this point on all you have to do is repeat this process over and over until you have a handle on your finances, have lowered your debt, and are putting money away and/or investing in on a monthly basis. Budgeting Secrets and Success If you have financial obligations with a spouse or another person, do be sure to do this together, as it simply won't work if you're not in it together. Budget software can be of great help, but it is just a tool in the end, and it's your determination and discipline which will make your personal financial budget a success or not.