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It's really just projecting, trying, and then adjusting                                                                            

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It's not easy. Most give up at trying.  What they don't know is adjusting is the success point.  The more you try and learn from the short falls, the better you get.  Typically most people start out documenting their monthly bills and estimating their other spending.  This usually leads to one of two outcomes: the first is spending more than what is budgeted by using money allocated for something else or using credit cards.  The other typical outcome is people just give up.  They claim that they just don't make enough right now to save.

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It seems the only people who can stick to a budget are the people whose parents taught them from a very young age to take a portion of every dollar earned and save first.  The remaining money would then determine what these people could or could not afford.  These people developed the skill of living within their means from a very young age.  Unfortunately, during the past few generations this lesson has been taught less and less.  Parents have stopped teaching financial discipline and attempted to provide a high standard of living for their children.  This has created the "I want it now and I will pay for it later" mentality.  This mentality was funded through credit cards and home mortgage refinancing.

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How to create a budget that works

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To create a budget that will work you must first realize that if you are not budgeting today than your first attempt at it will probably fail.  This is why we suggest a two fold process:  financial budgeting software, get out of debt, refinancing, refinance calculator, debt consolidation loans,

  • Create a budget and attempt to follow it

  • Document your spending for 12 months

 

The first step of creating and attempting to follow a budget will begin the learning process.  You will most likely under estimate your food, clothing and general spending.  You will have some months that surprise events develop and you will need to spend money that is being saved for future bills.  This is all a part of the learning process.  Try to balance and adjust the best you can while not giving up.  Just remember, you living off of the same amount of money you did before attempting to budget.  The only difference is that you are attempting to project your spending.  By the way, the definition of budgeting is:  financial budgeting software, get out of debt, refinancing, refinance calculator, debt consolidation loans, 

The process of projecting, monitoring, adjusting, and controlling future income and expenditures (expenditures is another word for spending).

 

During this year of attempting to budget and documenting your spending, you will develop a discipline that wasn't taught to you while you were growing up while gathering the data required to project spending successfully.  

 

The Steps

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1. Create a monthly log.  Either purchase a notebook or use a computer spreadsheet.  Create a category for income, one for savings and multiple categories for your spending.  Have a separate monthly category for each bill due monthly and attempt to group the rest of your spending.  You could possible end up with 64 different categories: 12 regular monthly bills and 52 that only happen once a year but on different weeks (like that once a year family, high school or college reunion that you spend money on).

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2.  Once you have 12 months recorded, divide each category you recorded by your gross income to get a percentage.  This is the beginning of a predictive model. financial budgeting software, get out of debt, refinancing, refinance calculator, debt consolidation loans,

 

3.  Analyze each of your categories and try to determine if the category is affected by inflation. Some are fixed and some are not; for example:

 

    • Food, clothing, utilities, kids sporting fees (inflation effected)

    • Home Mortgage (fixed)

    • Credit card payments (inflation effected)

    • Insurance: home or car (inflation effected)

 

 4.  Use what you have gathered to predict next year's spending by month and create a budget.  Use the percentages along with your next years anticipated income to generate the amount of money per month each category will require.

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5.  Compare actual spending for the month and adjust your remaining 11 months accordingly.

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6.  Analyze the categories of your spending and try to identify items that you can control and reduce to shift money to the savings account.  An example might include your cell phone package.  You maybe able to change you package to a less costly package if you make most of your call after a certain time and reduce your minute usage.  Another example might be reducing the amount of times you eat out per week.

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7. The next pay increase you have, allocate a portion of it to savings before you spend any of it.  Follow your budget and as you payoff your loans allocate a portion of that money towards savings.  Over time you will gradually increase your saving percentage as your income rises.  This will slowly shift your money management to a save first and spend secondfinancial budgeting software, get out of debt, refinancing, refinance calculator, debt consolidation loans, 

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