Friday, November 12, 2010

A Fool-Proof Method of Budgeting Money

There is a very simple method to budgeting money that anyone can use to get their finances under control. While you still have to go through the motions and follow the budget once you've created it, there are also safeguards you can put in place to help make sure that you stick to your plan for your money. Here we're going to take a look at a fool-proof method to dealing with your budget, as well as other things you can do to help yourself succeed.

First thing's first: figure out how much income you have coming in. This can be from jobs, gifts, whatever, but you need to know exactly how much income you have before you can start budgeting money. Once you have this on hand, figure out the bills and other expenditures you have that absolutely must be paid. Things like rent, gas, a car payment, and a power bill fall under this category.

After you've mapped out these things, you'll need to set aside an amount for savings that you won't touch under any circumstances. Ideally this will be at least 10% of your total income, or 25% of what's left over after you've paid the critical bills like food, shelter, and power. This savings should first go towards an emergency fund in a separate bank account that you won't touch for anything other than an absolute emergency (like your car breaking down or your house catches on fire). Once your emergency fund is about the size of three months income, then you can start saving for investments. This allows you to let your money work for you.

While these savings are great, you should also be paying down any debt you have with whatever money is left over. Stop blowing money on things you don't need, and start paying off your debt. The longer you let your debt hang over your head, the harder budgeting money becomes, and the more you'll owe over time.