Many people get uptight when they think about the process of creating a home budget. They see dark visions of three column ledgers filled with six digit numbers and lots of black and red ink. Home budgeting doesn't need to be like that at all. In fact, home budgeting can be quite easy. Most often, just getting a system started is the single hardest part.
You can start by looking at it this way, your budget will only have four main parts. Part one is income, which is the total of all funds you receive each month. The second part is expenses, which are all the things you need to pay out every month. The third part is disposable income, that's the money which is left over after you subtract your expenses from your income. Part four is savings, that's the part you get if the other three parts play nice together.
The way my wife handles our monthly home budget is simple. Income is tracked in our checkbook because all available funds go in there first. Expenses are tracked with a Monthly Bill Organizer that she purchased from Walter Drake. It's a handy notebook-sized organizer with pages for each month and pockets to put billing notices in. Each page has simple tables where we can record budget transactions as they occur. We simply slip our bills into the pockets, make a note of the date that they're due and then check them off as we send out the payments. Disposable income is tracked daily simply by using our checkbook balance. If we want to go out for dinner, we cross reference the checkbook balance against payments yet to go out. If the available balance plus expected income exceeds pending payment requirements, we're good to go for some shrimp stir fry.
Our savings program is handled from two angles. First, about 2% of my weekly paycheck goes directly into my IRA where the company I work for matches me dollar for dollar up to a maximum percentage. I also have $5 extra withheld each week by the federal government to avoid paying any tax withholding shortfall at the end of the year. As it turns out, because of some untaxed income increases this year, that strategy shall justify itself. Finally, as disposable income is revealed each month, we try to put at least 10% of any cash surplus into one of several small savings accounts.
Budgeting isn't anything you need to be afraid of. It's a simple matter of visually tracking what's going on in your money life. You can greatly benefit by starting to write down a record of what money is coming in and what money is going out. By giving your monetary transactions the attention they deserve, you'll quickly learn the actual state of your financial health and you'll be in a far better position to do something about it.
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