smart spending

How to create a budget that works for you

Start with a basic budget
Start with a basic budget © maxexphoto - Fotolia.com

We all know we need to budget, but the reality isn't as easy as it sounds. And who really has the time to stick to a strict money schedule and keep track of every little expense? Karen Lee, a CFP professional in Atlanta, has a few recommendations for people who would like to set up a budget, using this not-too-intimidating strategy.

Create an organizational chart by starting out with three columns: necessity, necessity with wiggle room and discretionary (expenses you want to make), Lee says.

Then, organize each item of your budget into one of the columns listed. Examples are rent, mortgage or car payments under necessities. These items are fixed and inflexible. Utilities and food would go under column two. You need them to live, but you can try to reduce these expenses.

Column three, or discretionary expenses, are items you can live without. These include entertainment, travel, hairstyling and nail care, and tickets to sports events.

Now the hard part: Start slashing items in column three, and search for ways to trim column two expenses.

"It can be done," Lee says.

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