It’s not always easy to come face to face with how much we spend. Unfortunately, taking a “head in the sand” approach to finances leads to overspending, debt, and stress. How much more fun would shopping be if you have already planned for and set aside money for gifts and other things you want to buy, without worrying about debt?
Time for a fresh perspective
If budgeting has always been difficult for you, it may help to look at it from a different perspective. Budgeting doesn’t necessarily mean giving up everything you love and converting to a super-frugal lifestyle. And it’s not meant to shame you into being financially responsible. Budgeting is about awareness. Once you understand where your money is going, you can design a budget that lets you truly enjoy your money.
It’s easier than it seems
Putting together a budget is actually pretty basic: you look at how much money you’re bringing in each month, how much is going out and where it’s going. To get started, calculate your monthly income. Be sure that you are using your “net” or “take home” pay, and not your gross pay. Your take home pay is your income after taxes and other deductions, like health care, 401(k), etc., have been subtracted from your pay.
Next, you need to add up your ongoing monthly expenses. This is often where we drag our feet, afraid we’ll discover we’ve been spending money on the wrong things. Again, budgeting is not about guilt, it’s about spending your money with confidence, avoiding large amounts of debt, and being able to save for your future goals.
Once you have tallied up your expenses, you should have a pretty clear picture of where you may need to cut back on spending, and also if you need to increase your income – maybe by changing jobs or taking on a second job part-time. One way to reduce your expenses is to transfer your high rate credit card balances to a Tower Mastercard®. You’ll save on interest and be able to pay down your debt sooner.
Avoid budget pitfalls
Treat saving money as an expense and give it the same priority as your living expenses. Don’t just save whatever’s “left over” at the end of the month. And, since life is unpredictable, it’s important to have an emergency fund, separate from your savings. Even the best budget can get derailed when faced with a large unexpected expense, like car repairs or a medical emergency.
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