A budget gives you an idea of cash flow (income), fixed expenses and the money available to you for allocating to sundry and major expenses.
Preparing a budget will give you the big picture of how much time it will take for you to save a certain amount of money to buy that certain something you've always wanted.
Maybe it's trip to Europe or the purchase of a grand piano.
Whatever it is, you'll find preparing a budget each year will give you the financing tools you need to wisely control your expenditure and plan your earnings.
In today's economy, prices of household commodities are high and interest rates are low.
Money is tight.
In such a situation, you can carefully review your budget and make changes accordingly.
You can see which budget items you can cut or minimize.
Keeping a tight control over your finances when the economy is down is essential and will help you, and your family, survive the tough times without skinning your knees too much! For instance, you'll find making changing to your budget to pay off your credit card debt a smart move.
It's amazing how much debt you can accrue by neglecting to do this.
Interest and debt add up to a staggering overwhelming amount and people often have to revert to debt consolidation.
So, smart changes to your goals could be something like paying off your credit card debt.
You would need to give this goal some structure by incorporating more details:
- A measurable amount - say $120 a month
- Time taken to pay off loan - 1.
5 years - How will you achieve this? E.
g.
Perhaps you can achieve this by cutting down on your budget expenses for eating out, saving eating out for only special occasions. - Keep a realistic approach.
Ask yourself how you will manage this since you and your family are used to eating out? You can try substituting your eating out times with cooking at home using gourmet food seasonings or center family times cooking a special recipe together.
Subtract what you owe from what you possess.
This will give you the big picture.
If your debts are more than your income, adopt a plan to help you break even as soon as possible with clear cut goals.
If they seem unmanageable, you may want to consider debt consolidation.
While fixed budget items may be the same, each family will have a different budget according to their family needs and earnings.
Use tools like a Monthly Cash Flow to track down your expenses which can help you predict your future income and expenses.
You'll find such tools an immense help and play a role in debt management.
You can efficiently plan where your money goes by setting goals, determining your net worth, budgeting and understanding your cash flow.