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Personal Finance Help Center  

Photo of a calculator, pencil, and graphs on paper Bud•get\ n : a financial report containing estimates of income and expenses; also : a plan for coordinating income and expenses.

Pretty simple definition.  But for many, formulating a budget is the equivalent of solving Rubik’s Cube.

Though budgeting may not be fun, or even easy, it is for many of us necessary to achieve our financial goals. Not having and sticking to a budget is the financial equivalent of the saying "if you don’t know where you’re going, any road will take you there." Without a budget, "there" might not be a pleasant place.

So how do you start? First, take stock of yourself and how you approach spending and saving. Are you the:

  • Planner who controls your financial affairs and has a budget that includes saving?
  • Struggler who lives from paycheck to paycheck and finds it difficult to budget for saving?
  • Denier who refuses to acknowledge financial trouble and therefore sees no need to budget to save?
  • Impulsive who lives and spends for today and thinks budgeting to save is a waste of time?

If you are anything but a planner, you will probably have to make some lifestyle changes in order to create and maintain a budget. Though not easy, budgeting rewards you by providing a better understanding of where your money goes and ensuring that you don’t spend more than you make.

Once you’ve acknowledged your attitudes to spending/saving, then you can start to develop a realistic budget by calculating your monthly household income (take home pay) and determining your monthly fixed expenses. This latter would include rent, mortgage payments, utilities, insurance, and other monthly recurring bills such as credit card and loan payments. You also need to track your daily expenses. In general, your monthly income less your monthly expenses equals the amount you should be able to save each month.  Now, that doesn't really sound so hard, does it?.

Of course, this is just a start. The real challenge is in record keeping and following your own budgetary guidelines.  There are a number of web sites that can provide you with valuable tools and guidance:

  • Federal Reserve Bank of Dallas: site features a downloadable or interactive publication called "Building Wealth: A Beginner’s Guide to Securing Your Financial Future
  • site is dedicated to teaching Americans the basics of financial education and provides information from 20 federal agencies government wide.
  • Dave Ramsey: site provides information and resources to help households avoid financial pitfalls, such as excessive debt and bankruptcy.