How To Get Started With Your Budget And Financial Planning

by Hank

You do not have to be an accountant or financial analyst to manage your personal finances properly. All it takes is some commitment towards the cause and taking the first step. Remember, no one has your best interests at heart more than you do. If you do not take a hold the reins of your personal finances, who will?

The first step is to draw the picture, which basically means getting all the information down on one piece of paper or spreadsheet. What shape are your finances in? Nothing woke me up more than to actually write out all of the debts that I owed credit card companies. I had no idea that it was that much when I was trying to dig myself out of debt. Do you know your net worth? Tracking your net worth can be very beneficial to see where you are and how far you need to go with your financial planning.

Not only should you consider all of your bills and the amounts you owe on credit cards, but you should also take a serious look at where and on what you spend your money every month. You could either spend time at the end of each week recalling the major expenses made or make a habit of noting down sizable expenditures on a daily basis. A few recurring items will top each household’s list of expenses such as groceries, electricity bill, phone bill, rent, gas, public transport costs, children’s educational expenses, allowances etc. Some items will be non-recurring such as a car’s repair cost, new dining table, carpet cleaning, vacation costs, etc.

Once you have figured what you spent your money on last month, try to plan more carefully for next month by identifying where you need to reduce spending. This could be through reducing the recurring items such as saving on the electricity costs or non-recurring items such as buying new items for your home less often. At the end of the month, compare your actual expenses with the planned ones and see if you made it to your estimated targets. If you did not, then think about solid ways that will help your cause for the coming month. For example, by making sure no extra lights are left on and using the air conditioning or heating only when required to cut on those expenses.

You can do all of this with a piece of paper and a pen or you could use technology to assist you. Simple software and applications on websites can guide you through the planning and recording process and identify areas of improvement. My wife and I track our finances on a simple Microsoft Excel spreadsheet. There is also a lot of content available online with cost-cutting solutions for households in different areas.

Other areas of personal finance such as personal investments, retirement plans, and college savings can also be dealt with easily by making some time specifically to consider your options and the choices you will make. Many financial institutions provide investment advice and solutions that cater exactly to specific needs of individuals like retirement plans for people in your income group with a similar household. Many bases also offer services like financial planning and financial literacy classes to members of the military as well. All you need to do is to talk to an adviser, spend time understanding your possible options, making a plan, and then sticking to it.

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