What is a budget?
By Dorothy
Rosen • Bankrate.com
The deadly "B" word: Budget. Often euphemized
as "Spending Plan" or "Cash-Flow Report," it conjures up the image
of a wizened miser, pencil stub in hand, dropping numbers on a ledger
sheet.
Grow up. An actual budget is simply the amounts that
currently come in and go out; a projected budget is an expectation
of future ins and outs.
Everybody who has money coming in and going out, has
an actual budget; in most cases, it's just not in writing. And it's
that "in writing" part that separates the financially savvy adult
(FSA) from the clueless masses (CMs).
What kind of an image does an FSA conjure up? To the
Diva he is a confident, generous human being who knows what he has,
what he wants to have and how he's going to get it. The CMs, on
the other hand, wander about the world, shrugging their wee shoulders
as they ponder the mystery of making so much and having so little.
The
written budget A written budget is a piece of paper
that has income and expense numbers on it. It's used by the FSA to keep him apprised
of what comes in and what goes out each month. It works best when it's short,
sweet and done on the computer. The software that many
FSAs use to keep track of their money is Microsoft's Money or Intuit's Quicken.
Either program will give you a huge bang for your buck. How
do I start? Take out your goal sheet (if you don't
have one, start it now) and put this on the top of the list: "I will know how
much comes in and how much goes out each month." This information is pivotal to
your financial success: you cannot reach your financial goals without it.
The
"estimate" budget To have some fun with this, the
Diva is going to walk you through an exercise, and then direct you to Bankrate.com's
budgeting calculator so you can compare your numbers against the national averages.
Before you start, print three copies of this page to use as worksheets for an
estimated budget, an actual budget and a projected budget. The
income part is easy. Take a look at your most recent pay stub and fill in the
income boxes. Note: Monthly numbers are usually used in budgeting,
however biweekly is used here to jibe with Bankrate.com calculator you'll be using
later on. Next, you're going to guess where your money goes; no
peeking at checkbooks or credit card statements. Write your guesses in the "Amount"
column. Actual Budget Go
to your Money or Quicken reports for the numbers; if you haven't gone high-tech
yet, compile the numbers from your checkbook and credit card statements. Don't
strive for perfection. Round the numbers to the nearest 10, so it's easier to
add them up. By writing your actual budget down, you
elevate yourself from the ranks of the Clueless Masses to the ranks of the Financially
Savvy Adults. Projected Budget You
know where you are; now think about where you want to be. Record your target numbers
on an expense sheet and jot a note next to each item indicating how you intend
to reach your goal. Let's say you want to cut your food
expense by 10 percent; eating in more will help you get there. Get some saving
ideas by reading Bankrate.com's "Cheap
eats" and "Once-a-month
cooking saves cash." There are many inexpensive books on
the market to help you track your money, such as Judy Lawrence's The
Budget Kit. The sooner you embrace the concept, the sooner you'll be on the
road to a rich life.
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