How to Create a Budget
Mankind cannot live in isolation. We need the help of people around us on many occassions in life. This involves not only personal issues but also financial matters. More often than not, you witness this whan you want to buy a house and are short of money. You would borrow the money required from helpful friends and relatives.
When the time to repay nears, you need to take control of your life and expenses and create that amount from your monthly income. Remember that you need to pay principal and interest. If you have your plan right, you should not really face a problem.
One of the ways to go about doing this is to make a list of your payments and prioritize the same. Do the same for your bills. Organize it in such a manner that you know the sequence of payments to be made and the respective amounts thereby. By doing so you have an estimate of how much money you need during a month and at what times. You can then arrange the cash acccordingly. You can avoid an immediate payment that you failed to notice before, by planning.
Lets take a look at debts that should be on top of your list.
- Rent or mortgage. Trya and pay off this on time and as soon as possible. This helps you have that roof intact for that peaceful sleep at night.
- Child support. Non payment in this case leads to penal action. this is not something you should avoid at any point in life.
- Utility bills. Budget your monthly expenses on gas, heating, water, electricity or telephone every month. You should do this in the first week of th emonth or when you get your paycheck. This helps keep your monthly expenses on check and also facilitates savings.
- Car payments. Include car maintenance and monthly loan payments in this.
- Other secured loans. pay these regularly as there is no respite if the creditor takes away your property due to non payment. The law would side with the creditor in this case.
After the above items come the other debts where payment can be avoided for the moment. Do not plan to avoid payment completely but it may not fall into the priority category. Be acerful though not to avoid it for aa long time since this may give your reputation a negative shade thereby affecting your credit report.
- Department store and gasoline charges: Keep the gasoline intact as it may affect your day to day living but plan to curtail it as much as possible. Longer times of non payment can result in penal action by your gas company. so be careful about this.
- Loans from friends and relatives. Morally speaking, there is an obligation to pay but sometimes since they’re family, we think that they will understand if we can’t. Check with them if you can delay the payment and ask them for how long.
- Newspaper and magazine subscriptions. These are recurring small expenses that have the capability to swell over a period of time. so better pay them while they are sizeable.
- Legal and accounting bills. If these remain unpaid after a long period of time, then that’s when you might be sued.
- - Other unsecured loans. As there is no collateral for the debt, the creditor can sue and then collect the debt from you. Better pay this off on time.
After this part of the exercise you will still have a list of items that appear to be confusing. They will fit both the essential and non-essential categories. Defering these bills for a long time could have dire consequences on your personal life. Evaluate these consequences and the possibility of this actually happening and then take a call on how to prioritize it.
- Auto insurance. The consequence in some states is losing your driver’s license.
- Medical insurance of bills. Be careful to maintain clear records else it may turn out to be a nightmare while renewing your insurance in te future.
- Credit and charge cards. You could lose your card previleges if you don’t pay your bills on time. But you should look at the number of cards you havae at the moment and first decide if you want more than a card in the first place. Rather than non payment, you should look at a slim and trim credit card history.
This should help you prioritize your expense list and provide you the direction on paying your monthly expenses. Best way is to mark these expenses on the calendar. If you are tech-savvy you could go ahead and invest in a palm pilot or better still use a software application to maintain your finances.
Once ou are done with budgeting, keep aside that amount for timely payment of your bills. One thumb rul you can follow - prevention is always better than cure. Alloting the required budget amount and then spending for other non essential items will help you remain in control. Stick to that budget and discipline yourself.
If there is very little left, then you ushould restrict all leisure expenses. Thats where you need to tell yourself that you will still follow a lifestyle that suits your budget. You may have to sacrifice a few good things in life.But that should not really hurt since you are enjoying the joys of that house you purchased right?
You can develop this habit only if you have the discipline and the attitude to change yourself. Once you do this exercise for a couple of months you will get an idea of how to manage this in a better manner. Practice and perfect this art. Its in your hands to change the quality of your life.
Article by Nakagava Ltd., creator of PiggyBob™, the first truly user friendly personal finance and appointment scheduling software. PiggyBob™ is an extremely convenient tool to help you keep track of your income and expenses, plus a very useful printable calendar to record all important events in your life. Downloand now
