Most people know how much money they earn every month. They know when the money is placed into the bank account and they know how to use it. There was never a need for financial classes to understand that piece of the budget. Troubles usually stem from money leaving the account. Bills are paid each month and the rest goes where? If you don't know where all your money goes each month, you may waste more money than you realize.
-Trips to the coffee shop
-Shopping off your grocery list
-Birthday party gifts
-Incidentals along the way
-An unplanned dinner out with friends
The first thing to do is to list out all your monthly costs. Don't forget to include the ones which only occur a few times a year (i.e. oil change or insurance payments). If you budget for the expensive months, you will have plenty of months with something left over on the side. The idea of a budget is to cover all expenses, plan for the future and safeguard your finances throughout. This means that you should have several savings accounts. If you don't know where your money goes each month, it will be difficult to maintain good management.
-Prioritize your monthly costs
-Add them up and subtract from your monthly take-home pay
-Subtract groceries and fuel costs
-How much money disappeared without a trace?
This is why tracking expenses is so important to a good budget. If you didn't have much money that went missing, your new direction is to cut down on how much you spend on the priority expenses. You can't run your budget so tight that you leave no room for emergency or savings accounts. This kind of behavior tends to lead people into credit challenges and eventually over their heads in credit card and payday loan debt. Make room for extras and save extra cash each month for when you need it.
For those of you who need to account for the lost money, it is time to get serious about tracking every penny that leaves your pocket. Whether it is a cold drink at the game or a coffee on the way to work you must save all your receipts. Do this for a month and see where your income ended up. It's important to pay attention to where it goes. How much of these costs were completely unnecessary?
Follow avenues that lead to well-managed budgets
Once you have a good view of what avenues your money leaves on, it is time to close them down. Where can you stop spending money? Make a conscience effort to live within your means. It is more important to save for emergencies rather than drink $5 lattes every day. You could finally afford to steer clear of credit cards and payday loan debt when you have the cash in the bank to cover money surprises.
Make the necessary changes but don't stop tracking your cash. You never know when new bad habits are formed. You are better off catching those money leaks every month then let them pour your money down the drain.
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