The Five Financial Goals –Budgeting

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Budgeting is Key To Financial Freedom

 By far the most important thing you can do to become financially successful is to begin to budget. In order to do that effectively you have to learn how to set a budget. This has two immediate benefits. It forces you to look critically and honestly at all of your expenses, and it helps you with determining where your income is best applied.

There are a lot of people who make a lot of money but are broke, because they do not manage their money well. If you’re a doctor or a lawyer making a good income, but you find that after paying all your bills you don’t have any money left, then in essence you are still broke . It is never going to be possible to become financially independent until you can set money aside for saving and investment. Without proper budgeting you will always be guessing as to how much money is coming in and how much is being spent.

Why ‘Budgeting’ Is Essential

budgeting

If you don’t know where your money is spent and how much you are spending then you are guessing. And guessing is gambling. Do you really want to gamble with your future? Of course not, nobody does.  Now that you know that you have to have a budget to produce long-term success, you can start to outline your financial plan or budget. The key here is to determine where you are going to spend your money and stick to it.

The first step in budgeting is to track what your current spending levels are. Track ALL of your expenses for a 30 day period. Every time that you make a payment, buy something or have an automatic payment made, write it down. It is critical that you are accurate, there is no point in trying to cover things up or be anything less that 100% truthful in your record keeping.

The second step is to determine how much money you have coming in. Budgeting is managing money in both directions. In order to be accurate you need to take into account ALL money that you have coming in and going out. You may only be paid your holiday pay once a year, and you may only pay your insurance once a year as well, so you have to pro-rate those annual items over the entire year in order to have an accurate picture.

The third step is to calculate all of the expenses that you have that you must pay. They are not optional. This could be electrical, phone, internet, gas and insurance for your vehicle to get you to and from work, rent or taxes, depending if you rent or own your housing. This list will be different for everyone. The fourth step of budgeting is to determine how much money you want to set aside for saving, and how much money you want to set aside for investing. Now you can calculate how much money you have available for discretionary spending.

In budgeting, discretionary spending is described as all monies that are not earmarked for a particular expense, savings or investment. This could include money for entertainment or eating out, holidays, shopping and stocking your man-cave. This is the ‘flexible’ part of your budget that is going to have to shrink if you don’t have enough money coming in.

Just like any government in the world you have only two things that you can control vis a vis budgeting. You can work on increasing your income from any and all sources, or you can reduce your discretionary spending. Doing anything else makes no sense and won’t produce the results that you are looking for.

Tomorrow we are going to look at debt reduction.

Till Next Time….

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Sigrid McNab

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About Sigrid McNab

Sigrid McNab is the author of #1 Amazon Best Seller, speaker and the CEO and Founder of sigridmcnab.com. Sigrid specializes in blogging, attraction marketing, and generating highly qualified leads. Sigrid teaches people how to build a successful online business.

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4 Responses to “The Five Financial Goals –Budgeting”

  1. Hale Yes Says:

    Very Nice Sigrid You obviously know this topic inside and out!

    Thanks
    Hale
    Hale Yes recently posted…Dr. Hale’s Take on Internet Marketing Resolutions That WorkMy Profile

    [Reply]

    sigrid Reply:

    Thanks Hale!

    [Reply]

    Reply

  2. Dagmar Wichary Says:

    The way the economy is going we all have to stick to a budget or we end up like the Governments.

    [Reply]

    sigrid Reply:

    Dagmar, I agree. Things are tough for many right now…

    [Reply]

    Reply

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