“Budget: a mathematical confirmation of your suspicions.” -A.A. Latimer

All jokes aside, budgeting is the necessary evil of personal financial success. Dissecting spending habits and allotting set amount to “X”, “Y” and “Z” for many seems restrictive and tedious. However developing reasonable spending habits and sticking to them, can make life’s “extras” and financial freedom possible for you in the future.  Live the life you have always dreamed of, instead of paycheck to pay check.

Creating a personal budget is as easy as counting to three. CNN Money breaks it down step-by-step.

1. Identify how you are spending your money currently
2. Evaluate current spending habits and set goals that take into account your long-term financial objectives.
3. Track your spending to make sure it stays within those guidelines.

Experts suggest that in a perfect budget, 30 percent of your gross income should be spent on housing and other debt. Four percent should be spent on insurance. Fifteen percent should be tucked into savings and 25 percent should be earmarked for taxes. The remaining 26 percent is left for general household expenses.

“Budgeting is all about controlling your finances instead of letting your finances control you,” said Jim Tehan, a spokesman for the Myvesta Foundation, a self-help consumer education Web site. “That element of control is going to save you money in the long run.”

Budgeting is the key factor in financial security, but don’t forget to “invest” in yourself as well.  When you learn more, you earn more. The more financial knowledge you have, the more successful you will become at maintaining your budget and making sound financial decisions. Listed below are the top 10 financial basics everyone should know.

1. Think in Present and Future Tense

Personal Finance, especially your own personal budget, is about making smart decisions that affect your present and your future. Many plan for long-term purchases, a house, a car, kids’ college education, but forget those little purchases. Maybe you have been wanting a summer family getaway or to remodel your kitchen. Setting short-term goals should also be accounted for in your financial planning and budget. 

2. Spousal Agreement, Get on the Same Page

Money is one of the most common causes of arguments in any relationship or marriage. Do not sweep this topic under the rug, talk about it. Making decisions after careful discussion and coming to a mutual agreement can save you and your significant other from financial stress.

3. Budget

Set your budget and don’t budge it, the more detailed the better. Whether you are single or married, a budget is the best way to account for where your money is going. Account for all of your income and then your expenses. Track it throughout the month in a ledger and do not exceed the amount allotted for each category.

4. Educate Yourself

As an investor, it is important for you to do your research. Do not invest based solely off hearsay. Just because your coworker says it’s a winning investment, doesn’t make it true. Know the background, past performance and the classifications of the company in terms of your portfolio.

5. Invest Smart

Investments come with both high risk, and the potential for big reward. Generally the higher payoffs have the most risk involved and conservative investments lead to less income. Building a healthy investment portfolio should have a balance of the two, but never go beyond your comfort level. 

6. Ask a Professional

Intimidated by investing? If you have questions regarding your current or future investments, stocks, or money market accounts there are people to help you make those decisions much easier. Go to a professional financial planner, credit counselor or personal banker for answers.

7. Read the Fine Print

Evaluate the terms of an agreement when applying for a credit card or loan. What are the interest rate, grace period, terms and conditions of the loan or additional fees? You should know the answers to each of these questions. Even better, use your budget to set aside money and avoid interest fees by paying for things for which you all ready have the funds.

8. Avoid Bank Fees

Know what fees are charged when. Banks make money when people screw up. Since we all have a slip now in then, its important to pay attention to these things. For example, some checking accounts have a minimum balance; dip below it and the bank will hit you with a fee. Monitor your accounts to prevent these common errors.

9. Get Insurance

When planning your budget, do not leave out insurance: homeowner’s, car, life, health and dental. Plan for it in your budget and evaluate your policies.

10. Estate Planning

Do you own property, make a living, know your future income, have intellectual property? These are all assets. If you have assets, you should have a will. It will be both a relief for your family and will make other financial decisions easier.

Open the doors to your dreams. Do not let poor financial habits stand in your way! Create a budget and following these 10 basic financial tips to become a financially savvy individual who is successful both now and in the future.

 

 

 

© 2012 Inspired Living, LLC

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Keri Murphy and the Inspired Living team is on a mission to empower people to use their unique talents in a way that allows them to Dream, Live and BE all that is possible through speaking, coaching, celebrity interviews and original on-line content. Get Inspired at inspiredliving.tv