Donell Edwards, Blogger
About Donell Edwards: Donell Edwards is President of CWR Media and is also founder and publisher of The College World Reporter (CWR) magazine and CWR World News & Information Service. He is also a professional speaker, freelance writer, and entrepreneur.
Know Your Money
Wednesday – May 21, 2014
Knowing Your Personal Finances
By Donell Edwards
Do You Have A Budget?
According to a 2013 Gallup Poll, Gallup’s Annual Economy and Personal Finance Survey for 2013, says nearly two-thirds of Americans do not prepare a detailed written or computerized budget every month. If you are among those 67% who do not have a budget, why not? As we have mentioned repeatedly in this blog, one of the first steps to effective personal money management is having a realistic and complete budget. Your budget is your roadmap to your personal finances. Not having a budget is like trying to travel to some place that you have never been before, and you have no idea how to get there, and you do not have a roadmap or any directions.
Why Having A Budget Is Important Having a budget is important for a number of reasons. A budget should take into account everything you plan to spend during the month. The budget will reveal if you are overspending and don’t have enough money to cover all of your projected expenses. This will allow you to make adjustments, and really determine what are real needs and what are just things that you want. If you are in a situation where you have long-term commitments that cannot be eliminated immediately, the budget will help you to see what you need to do to work to live within your means. If you follow the budget, you will also learn discipline, sacrifice, and how to develop the willpower to resist the temptation to spend frivolously. The budget will also help you to do an effective job of regularly monitoring your spending.
How To Plan A Budget
Whether you are using a written budget or computer software, your budget should include everything that you spend during the month. This includes your household expenses like mortgage or rent, utilities, grocery, and vehicle payment, insurance, recreation, fees for clubs or organizations, clothing, saving, and anything else that you will purchase or spend money on during the month. If you have pocket change or use the ATM frequently for miscellaneous things during the week, make sure that this is included in your budget, and that you do not spend more than you have allowed in your budget. A good practice is to give yourself an allowance for those things so that you know how much you have to spend, and you make sure that you do not spend more than you have allowed. Your budget should be based on your normal income, not overtime that you expect to work, not bonuses you expect to receive, nor any tax refunds or anything other than your regular income. Then, based on your income, prepare your budget and make sure that the total budget does not exceed your earnings or income.
A detailed, realistic budget is a must in order to effectively manage personal finances. So, if you do not have a budget, make it a priority today to sit down and take the time to plan your budget, and make the commitment to live rigidly within the budget you establish.
To find resources to help you plan your budget see our March 4, 2014 post, Budgeting and Spending Resources. We also encourage you to read today’s Must Read, 10 Steps to Making A Financial Budget.
Must Reads: 10 Steps to Making A Financial Budget
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Disclaimer: I have a Bachelor of Business Administration degree but I am not a financial adviser. However, I have acquired years of knowledge about personal money management through my life experience working through my own personal finances that allows me to share that knowledge with readers of Know Your Money. The Know Your Money Blog posts written by me are my own common sense observations and opinions and are for informational use only. Although my blog includes contributions from experienced financial professionals, please make your own financial decisions based on personal research or contact a financial adviser.
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