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Budget, or go home

By Kemberley Washington · Bankrate.com
Thursday, December 6, 2012
Posted: 2 pm ET

We hear it all the time: Spend within our budgets. But what does that really mean?

Many people spend aimlessly without preparing a budget and as a result, they usually come up short of their financial goals.

Trust me, I know. There have been times in my life when I figured I would just "wing it" or spend according to my feelings. But that type of attitude got me nowhere.

It wasn't until I committed to a budget that I saw changes in my finances.

Creating a budget

A budget is simply a listing of expected income and expenses for a period of time. Generally, it should be prepared at the beginning of the month, with the understanding that it is a flexible document.

You should budget for all expected expenses, which include recurring costs such as rent or mortgage payments, cable and cellphone bills, and groceries. In addition, budget for items you might pay infrequently, such as annual property taxes or a quarterly insurance bill.

Setting aside a few bucks toward these expenses can keep you from falling into "panic mode" when bills arrive.

Get inspired

Also, creating an "inspirational budget" is a great exercise. There is power in writing your thoughts on paper, and often these thoughts will manifest.

I use my inspiration budget to list what I would like my future budget to be. That might include an increase in income and a reduction in expenses. I call it my "inspiration" for several reasons. First, it provides me with a clear vision to determine where I am headed. It also gives me inspiration to keep pressing on, knowing I will reach all my financial goals. Finally, it serves as a constant reminder that small sacrifices will provide big rewards in the future.

I have seen this exercise work in my life. For instance, in the past it was my desire to reduce my expenses. Seeing the expected extra cash flow on paper gave me the inspiration to forgo unnecessary expenses and continue to push toward victory.

Whatever your financial goals, the odds of achieving them are better if you simply prepare and live within your budget.

Remember: Your choice, your future!

Kemberley Washington is a certified public accountant and a business professor. Subscribe to her personal finance blog at Kemberley.com, or follow her on Twitter.

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