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Most people would rather get a tooth pulled than take the time to create a household budget. It seems much easier to just go with the money flow, act like you are trying to watch your spending and hope that you have money left at the end of the month. The first

Do you have a budget problem? Ask yourself these questions: 
1) Do I spend more money than I make? Do I know how much I bring home and how much I spend?
2) Am I saving any or enough money for college, retirement or an emergency fund?
3) Do I rely on debt for major purchases or to help get through to the end of the month?

4) Do I regularly have a fear of being close to your credit card limit or overdrawn with your bank account?

If you answered yes to these questions, you need to make a budget and control your spending. Everyone needs some type of financial plan to know where they are going and how they are doing.
Getting Started

If this is a family budget, make your budget as a family.  The budget will never work if only one person makes the budget and tries to stick to it, or tries to force the spouse to go along with it.  The budget will be your map that tells your money where to go. Without your map,  your money floats all over the place and is gone before you reach the end of the month.

There is no fast and easy way to start a budget. You have to start with an honest look at how you use your money today and yesterday, to make plans for how you will use and save it tomorrow. To get a more clear picture of your financial life, write down all income and spending for each of the last three months and use the average.


Start with Income and Expenses

 Income: salary, interest income, child support, alimony, rent and other payments.

Expenses: housing (including property taxes), food (including groceries, work and school lunches), utilities (including telephone and garbage), personal (clothing, haircare, drycleaners, healthclub), family (medical/dental, pet care and pet food, babysitting, alimony, and child support), basics (home repair and cleaning, furniture, decorative/improvements), transportation (gas, auto maintenance, parking, public transportation), insurance, recreation and entertainment (vacation, movies, eating out, club dues, cable tv), gifts/charitable contributions (charities, church, holiday gifts), savings (retirement funds, college savings),  and taxes.

Then, break your budget into fixed expenses and flexible expenses. The fixed expenses include mortgage/rent, car payments, utility bills, insurance, car payments and savings. You know how much you will pay for these each month. The flexible expenses are the ones you can directly control: food, clothing, gifts, entertainment, travel, home maintenance, and cellular service.

Closely analyze your flexible expenses and be honest about how much you spend. It is easy to say you only spend money on necessities but actually forget about the new shirt, concert, dinners out and gifts that sneak into your monthly spending. Keep track of your spending and expenses for a month; you may be surprised at how freely money flies out of your pocket.  These flexible expenses are going to be the places where you can cut back and bring your budget into balance. You can also cut here and increase the amount that you pay on your credit cards or put into savings and investments.

Once you recognize you much you spend each month, on flexible expenses, you will more carefully consider each purchase. It is time to put a value on your spending. Figure out your hourly wage. Is the purchase really worth several hours of your labor?

Here is a general guideline for spending as a percentage of income:

Housing   20-30%,  Utilities  4-7%,  Food  15-20%,   Transportation  6-20%,   Medical  2-8%,   Clothing  2-4%,

Investment/Savings  5-10%, Debt Payment  15-20%,   Misc. (entertainment, recreation, gifts)  5-10%
Easy Ways to Cut Spending

There are many almost painless ways to cut back on spending. Limiting meals out and skipping junk food from the vending machine or grocery store are easy to do and healthy. If you only need cell service for emergencies, but run up a large bill each month, cut back to a prepaid service and only use it for emergencies. Cable is expensive; cut back the premium channels to just basic service. Shop thrift stores and consignment shops. Get a library card and check out your favorite books, movies and magazines for free. Comparison shop for the grocery items you buy most. If you can’t afford to pay for an item with cash right now, save up for it. Do not put it on your credit card and pay in interest several times what it is worth. If you must buy a car, buy a used car that you can afford, not the flashiest one you look best in.

To reduce your expenses, make sure you are paying the lowest rates for your monthly bills. Shop around for lowest rates for credit cards (, long distance (, insurance (, or cellular service (

Make Budgeting A Good Habit
Keep working at controlling your money until it becomes a habit. Living within a budget may be difficult and uncomfortable at first and may take several months to adjust , but the longer you stick with saving and debt control, the more it will become a lifestyle. Planning and discipline today is the only way to determine where your money will be tomorrow.

Use accounting software like Quicken or MSN Money to help manage your cash flow and keep up with your budget. The bill pay feature makes sure your bills are paid on time to avoid late fees.

Make paying down debt your top priority. Pay off the credit card or loan with the highest interest rate and then pay down the next highest. Interest payments are the vacuum that sucks money out of your financial security.

You may even need to take a second job or have a yard sale to pay off debts and build up savings. After you have paid off your debt, build an emergency account for 3-6 months of expenses.

Set savings goals such as college, early retirement, a down payment on a house, or pay cash for your next car. Don’t forget fun things like cash for entertainment or travel. Break these into smaller parts, how much you will have to save annually, monthly or weekly. Unplanned purchases will always reach out to grab your money. Remove yourself from this temptation by automatically withdrawing savings from your account each month.

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