compounding returns: Personal Finance 101: Building a Budget

If I know what I earn each month and the amount of money I have to put away for fixed expenditures, it gives me the freedom to be able to plan the rest of the month according to the income that I have left.?

Budgeting is the basic foundation of any kind of financial plan, but if you are considering starting a budget, there are certain basics that you should be familiar with.

Budgeting Basics:?

The importance of budgeting:?The first thing that you should do is understand the importance of personal budget. For a lot of people, developing a budget may be a difficult financial exercise. For me, however, a?good budget?helps keep me on track financially while identifying hidden cash flow problems.
How to create a basic budget:?Probably the most important part of personal budgeting is the creation of a budget itself. No matter what method you choose (cash budgeting, spreadsheets, or Mint.com), you need to sit down and create the budget.

My method is simple, I usually write everything down on a notepad that I maintain for personal budgeting purposes, and base my next month's predicted expenditures on my last month's expenses. However you choose to create a budget, it is?imperative?that you create a system you can stick with. ?

How to make budgeting a success:?Once you have made a budget for the month make sure that you follow it. Discipline is crucial to success. It was quite difficult for me, in the beginning, to master the art of budgeting. But, I am happy I did it. Building and maintaining a budget is similar to starting a diet. You need a lot of discipline in the beginning, but after a while it begins to yield results as long as you do not let yourself drift away from the plan.

How to automate your budget for long term success:?Using a spreadsheet or site like?Mint.com?can be an easy and effective way to keep track of your finances. In fact, you may be able to find a worksheet on any budgeting website which will let you benefit from the spreadsheets created by others, or you can create one for yourself.?

To achieve the best results, stay disciplined:?Overspending is easy to do, but if you are like many Americans with a penchant for spending more than you earn, you need to have extra control over yourself. If you are trying to follow a budget, you have to stick to it. Otherwise, it's just a piece of paper or spreadsheet with numbers on it.

Personal budgeting does not just provide a means of tracking income and expenditures. Any good budget will also help you save money, no matter how small the amount may be. So always remember to budget for savings, that way, by paying yourself first, you will always have some money ready for a rainy day.?

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Source: http://www.compoundingreturns.com/2011/07/personal-finance-101-building-budget.html

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