Thursday, March 20, 2014

Personal Budgeting Part I: Getting Started



What is a budget?

A budget is a breakdown of all your monthly income and expenses. It helps you keep track of where your money is going; it also shows you if you are spending too much on something, and where you might have the possibility of saving money.

If you have never looked at your own budget, you might think that you know well where you spend your money. Yet you might be surprised what we can learn from seeing it all on paper, with a different perspective. It is a good exercise on the path of financial stability.

Make your own

In the month of May I will be presenting a feature article teaching you how to make your own budget.

If you wish to make your own budget at that time, I have some homework for you:

  1. Take a large envelope and put it some place handy. Write on it “BUDGET”. 
  2. During the whole month of April, I ask that you save proof of every single expense that you have: the home gas bill, phone, cell phone, gasoline, insurance, clothing, water, gym, rent, credit card bills, mortgage... you name it: to the envelope. If there is something that you pay automatically and therefore it does not provide you a receipt, write its name on a piece of paper, the amount you pay, and put it in the envelope. 
  3. Advice: Every week, look at your wallet or purse and take out all the receipts and stuff them in there, too. Do you eat out? Yes, we will need those receipts as well.

What if


What if I pay my car and home insurance every three months? Then divide the amount by 3 and write that amount on a piece of paper and then… yes, to the envelope!

What if I can’t find a receipt? Then go online, to see if you paid with a card, and jot that on a piece of paper, saying what it was. If you paid with cash, write the most approximate amount that you remember.

The idea is for you to have as much information as possible about the things on which you have spent your money. The more information you have, the more accurate your budget will be. Please keep that in mind, and start keeping track of those bits of paper. They are important!

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