How To Win The Budgeting Battle

Contributed by Brian Ochsner

Budgeting seems like a simple concept at first glance. However, a lot of people have difficulties in planning—and sticking with—a monthly financial budget. Here's how you can plan ahead, and succeed at the game of financial budgeting.

The first step is to sit down and write out all your recurring expenses that you know will be the same amount, month after month. They include your rent or mortgage, car loan payment, insurance payment, phone and utility bills.

As we all know, life isn't always constant and predictable. Auto, medical or dental bills can pop up when you least expect them. That's why you should allow yourself some "buffer room" in your monthly budget. For example, if your take-home pay is $4000 per month, you shouldn't set your budget at $3800-$4000.

You're assuming everything will go perfectly every month (which it usually won't), and you don't have any savings built up to handle those rainy days. That makes it very stressful on a family or an individual when these emergencies come up.

If you pay these emergency bills with a credit card, that will affect your budget later in the year. You'll have to factor in a higher minimum credit card payment. Depending on how much that's been charged to your card, it can be a small or a larger added expense.

If your monthly budget doesn't give you much wiggle room, you may want to consider ways to reduce these monthly expenses. It could be a less expensive house or apartment, car loan, insurance policy, or cell phone service. Shopping around or negotiating for better deals on these items will be worth your time in money savings, and decreased financial stress.

With the recent spike in gas prices, you may want to consider a more fuel-efficient car. Besides the benefit of better gas mileage, the sales price, monthly loan and insurance payments are also usually less. This could be a big financial savings especially if you drive a larger car, pickup truck or SUV.

If you don't want to reduce your expenses, you'll have to find ways to increase your income. It can be from a second job, or a part-time business, such as selling products on eBay®. Getting Internet training, and learning how to sell and market products on and off-line are excellent and necessary skills you'll need to succeed.

Along with the concept of having an employer or business pay you, remember the wise advice of paying yourself. That's right-in your budget, you should set aside a portion of your earnings, preferably in a savings account. This way, you won't be tempted to spend the money on an impulse item that could bust your budget.

Another potential budget buster is the use of "payday loans." They're an easy, convenient way to get cash when you need it. However, the interest rates on these loans are outrageous!

In Colorado, these places charge $30 interest on a $150 loan, $60 on a $300 loan, and $100 on a $500 loan! That's a 20% interest rate for usually two weeks use of that cash. The annualized rate of interest on these loans comes to an astounding 520%!

Although it's a quick easy way to get cash in a hurry, I'd recommend avoiding these payday loan places like the plague. These loans can solve your short-term cash needs, but magnify your long-term financial challenges.

The use (and abuse) of credit cards can also wreak havoc with a monthly budget. I'd recommend using only a debit card. This way you can buy something only if there's cash in your account. It's especially helpful if you've had problems overusing credit cards in the past.

Along with your immediate cash needs, you need to factor in your long-term financial goals with your budget. They can include savings and investment for your retirement, a child's college education, or other long-term financial goals you want to achieve in your lifetime.

One more key to minimizing unexpected expenses: make sure your health insurance is paid up, and you know exactly what it covers. This way there are no surprises if you make a trip to an Emergency Room, acute care clinic, or your doctor's office.

Budgeting isn't a one-time process that you do and forget about. You have to constantly measure, monitor, and adjust your spending habits every single month. The discipline and work you put in to stick with a monthly budget now will pay financial rewards later in the month and years to come.

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About the Author:
Brian Ochsner is a freelance copywriter living in Denver, Colorado. His blogsite is: http://DenverCopywriter.Blogspot.com