The art of budgeting...

The art of budgeting.

When setting up a budget, most people take their income times it by the number of pay periods in one month, subtract their bills and set aside money for everyday expenses. Whats wrong with this? Well nothing, if you lead a life that is rigid enough to sustain a budget like this. The truth is most people are just too dynamic to be able to settle easily enough within those confines.

The art of budgeting starts with phases:
Phase 1: assess your personal and financial situation (needs, values, life situation).
Phase 2: set personal and financial goals.
Phase 3: create a budget for fixed and variable expenses based on projected income.
Phase 4: monitor current spending (saving, investing) patterns.
Phase 5: compare your budget to what you have actually spent.
Phase 6: review financial progress and revise budgeted amounts.

Well-written personal and financial goals should:
• Be realistic
a student working part-time is not likely to be able to afford a new car every couple of years.
• Be specific
“i want to save $5,000 for a down payment to buy a house.”
• Have a timeframe
“i want to pay off my credit card within the next 18 months.”
• State the action to be taken
“i want to start an automatic deposit savings account with monthly withdrawals from my
checking account.”

You can’t expect to get it right the first time around, like anything else it takes patience, planning and perseverance. These three p’s will help you on your journey to financial freedom and awareness. Without one of those p-words, well then you’re just left with 2 p’s to work with, and we all know what a mess that can be. ;)


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