You'd never
set out on a cross-country road trip without consulting a map. And, likewise,
you can't expect to reach your financial goals without developing a plan for spending
and saving.
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7 steps for a successful budget | |
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Indeed, budgets play a pivotal role in helping consumers pay off debt,
feather their nest egg and make the most of their hard-earned dollars. Yet,
despite their best intentions, many Americans lack the money-management skills
necessary to get their bank accounts under control. Why? Often, it's because they
don't know where they stand, says Jim Tehan, a spokesman for Myvesta Foundation,
a self-help consumer education Web site. "People write
out budgets all the time without knowing where their money is really going,"
he says. "What they've created is a wish list of how they'd like to spend
their money, but it's not realistic. It's a page of lies."
Follow
the money: Track your spending
The first step to developing
a budget, says Tehan, is to
track your expenses for at least
a month, using a checkbook ledger,
a sticky note inside your wallet
or a Bankrate daily expense
work
sheet. Be sure to record
every purchase no matter how
small, including ATM fees.
"Once
you know where your money is going, you can make an educated decision about how
best to allocate your money," he says. Many novice budgeters
make the mistake of becoming too financially conservative, at least on paper.
"The No.
1 rule of setting budgets is
to not cut all the fun out of
your life. Inevitably, Spartan
budgets that have no allowance
for entertainment are doomed
to fail."
Instead, learn
to moderate. "If you're
eating out every night, and
that's something you enjoy doing,
try eating out once a week instead,"
says Tehan. "It's not about
cutting out everything that
gives you joy in life. It's
about better allocating your
money."
Make
savings contributions automatically
Though every budget scenario
is different, Curt Weil, a Certified
Financial Planner for the Lasecke
Weil Wealth Advisory Group in
Palo Alto, Calif., says a good
rule of thumb is to allocate
at least 10 percent of your
earnings toward savings, using
direct deposit to pay yourself
first.
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