Money Lesson 2 - Making A Budget

Budgeting is very important in financial planning. It allows you to get a grip on your spending and know where your money flow to, how it is being used and whether it is being used in the way you want it to be used.

In creating your budget plan, it generally requires the basic three steps:

Identify how you spend your money now
Evaluate your current spending and set goals that take into account your financial objectives
You must keep track your spending to make sure that you are spending is inline with your budget plan.

Use Personal Finance Software

It is not wisely to plan your budget using just paper, pencil and electronic calculator, it will waste a lot of time and the figures might be miss-calculated. At least Microsoft Excel Spreadsheet is recommended, but personal-finance program such as Quicken or Microsoft Money is the better options, this software is special dedicated budget-making tools which you can use to create your budget effectively.

Keep Track Your Cash Draw From ATM

If previously you use to withdraw from the ATM machine and let the money evaporate from your pocket with apparent explanation, under your new budget plan, you should plan a better record tracking on money withdrawal from ATM.

Impulse Buying Can Cause Spending Out Of Limit

You spending behavior are the key to ensure the success of budget plan. Impulse purchase is dangerous and it may causes you spend out of your budget limit. According to government figures, many of households with a total income $50,000 or less are spending more then they bring in and many spend in uncontrolled purchases (impulse purchase) and they are the candidate for bankruptcy.

If you use to have impulse purchase behavior, you need to make some serious spending cuts on impulse purchase and always stick to your budget plan. If your income doesn’t cover your costs, then some of your spending is probably for luxuries, even if you have been considering them to be filling a real need.

Don’t Include Dollars That You Can’t Be Sure To Receive

When projecting your money in your budget plan, you may foresee some source of dollar coming in but you can’t confirm about it. If this is the case, don't include dollars that you can't be sure you'll receive; such foresee dollars are year-end bonuses, tax refunds, or investment gains.

Beware of Spending Creep.

As your annual income climbs from raises, promotions, and smart investing, don't start spending for luxuries until you're sure that you're staying ahead of inflation. It's better to use those income increases as an excuse to save more.


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Money Lesson 2 - Making A Budget

Money Lessons