Personal Finance

How can creating a budget put more money in your pocket?

Ever wonder how some people have enough money to
go on vacation every year or go to the movies on a regular basis and other
people are barely able to pay their bills on time?

Well, for many successful money managers, the trick is in the budget. The very
word causes the eyes to glaze over as if reading the latest Census Bureau's
statistics. Great reading by the way if you're having a tough time going to sleep
at night.

A budget holds the secret to financial success. It can be the difference between
living life to its fullest and living life in fear. A budget can also help you reduce
stress levels.

A budget is your defensive financial game plan. All good sports teams have an
offensive game plan and a defensive game plan. Think of making money as your
offense and saving money as your defense. Obviously you need both offense and
defense in order to play the game, right? And you need to have a good offense
as well as a good defense in order to have a chance of winning the game.

If, after paying the bills, you have additional money at the end of the month,
you've won the victory. Time to plan for the next month's game. However, if you
don't have additional money or can't pay your bills at the end of the month,
you've lost.

The first step in budgeting is understanding that a budget is critical to your
financial success. If you don't believe in budgeting, you won't develop good
habits of creating one, maintaining it, and tracking your spending.

How much are you spending? You might be shocked after you find out just
exactly where your money is going but DO THIS ANYWAY.

Use the free copy of Ace Money Lite , create a spreadsheet, or you can use a
sheet of paper. List the following items:

Rent/Mortgage
Car payments
Credit cards
Car insurance
Medical insurance
Groceries
Gasoline
Prescriptions
Electric
Gas/Heating oil
Water
Phone
Cell phone
Internet
Clothes
Dining out
Entertainment
Household items
Car maintenance
Home maintenance/Repairs
Gifts
Charity
Church
Travel/Vacation

*Add additional items as needed.

Chased a good paper lately?
Now look through your checkbook, your purse, wallet, and any other place
you keep your receipts. Review your credit card statements, bank statements,
and any other statements including utility bills that document your spending.

1. Write the amounts next to each item above.
2. Add the amounts in order to get a grand total.
3. Compare the grand total to the amount of money you made during the month
(Subtract the grand total from your monthly earnings). A positive number is good,
a negative number, not so good.

If the number is positive, congratulations, you now have money to invest or put
into savings. Ask yourself whether the amount is acceptable. Would you like to
have more? Changes will need to be made in either your offense or defense if the
answer is yes. In other words, you either need to make more money or spend less
money if you want to have more money at the end of the month. It's obvious but
to many it's not that clear.

If the number is negative, you have some work to do. Determine how much you
spent for each item. Are there areas that you can cut back on this month? Look
to areas such as entertainment, travel/vacation, gifts, and clothes. These typically
are optional expenses. Now look at the other amounts for opportunities to reduce
the expenditures. See "Defensive Stratey" for ways to reduce your debt.

You will need to work on offense if there is absolutely no way to reduce your
monthly spending. See "Offensive Strategy" to increase your income.