How to set a monthly budget

You have an emergency and you need cash. Where are you going to get it? If you had a monthly budget, you could have been prepared for this situation. In today's economy, having a household budget is pretty much a requirement for survival. You need to know where all your nickels and dimes are going. You know you pay your bills, but do you know where the rest of your money is going and why you don't have any left?

The first step to understanding where your money is going and creating a monthly budget is to start keeping track of every little penny that you spend. And I do mean EVERY LITTLE PENNY! If you by a pack of gum, keep track of it. Loaned a friend a few dollars? Notate it! You can keep a log book similar to an vehicle expense log in your purse or glove box. Any time you spend any amount of money, whether it be cash or via a debit or credit card, write it down! At the end of the month when you are sitting there wondering where it all went, you can look at your log and say "Oh yeah, I remember now!"

The next step is to gather all your absolutely have to be paid bills. You know which ones I'm talking about; the rent, the car payment, car insurance, utilities such as electric and water, student loans, all of that. This will be the amount of money that you MUST have each month to survive. I'm not including groceries in this so keep that in mind. These are only your fixed expenses each month. You can average out the utility costs but you should know about how much they will be so this shouldn't be too hard. Hopefully these fixed expenses will be quite a bit less than what your income for the month.

Now, sit down with your paystubs and figure out how much money that you actually have to spend a month. This amount may vary depending on your job, any birthday money you receive and whether or not you take on any extra jobs during the month. Maybe you mow someone's yard every week. Keep track of that as well. Every penny helps! Once you have the total amount that you have coming in, subtract the total amount for the fixed expenses. Now you have your "disposable income".

Look at your so called "disposable income". Doesn't seem like a lot, does it? And if it does, count your blessings. The next step is to take some of this "leftover" money and put it into a savings account of some kind. Whether that be at a bank or under your mattress, that is entirely up to you but this is one step you definitely do not want to skip! Even if you save only $50 a month, that is still $600 that you will have at the end of the year that you wouldn't have had otherwise. Deposit it into an interest bearing savings account and watch your money grow. Maybe not a lot, but a little is good too. I would even suggest taking it at the end of the year and putting it into a short term CD which will not only bring you a little more money, but will also prevent you from going and buying that new pair of shoes just because you want them and have money to burn.

So, now that you have your bills paid and your savings set aside, you can take what is left and divide it in to the other "necessities" such as groceries, entertainment, clothing and the like. You know exactly how much you have to spend, have that little emergency fund started, and so there is less stress now. You know where your money is going, you know where you are going to spend it. If you do feel the need to buy that pair of shoes, ask yourself if it is in your budget. Would you rather have the shoes or would you rather eat? If you do happen to have enough for the shoes, take some time, think it over, if you still must have them in a couple days, THEN go back and get them. Spare yourself the buyers remorse. As for groceries, clothes and most anything, I would suggest watching for sales and coupons. Bargain shop, comparison shop, and get those really good deals! You can find some great ones online which also gives you an out as far as NOT getting something. It's easier to go to a different website than it is to just walk away from that awesome pair of sandels!

So, your requirements of life are met, you have your savings growing and you now know where all of your money was going throughout the month and are taking steps to avoid the situation. You are well on your way to being prepared for an emergency and, if you take the money that you have saved by shopping smart and throw it into your savings account as well, you will see yourself being more prepared than you thought possible just a month ago. The 5 cents here and 2 dollars there really does add up quickly. Keep your wallet closed and yourself out of the high end store with the shoes that are calling your name and you will find yourself able to handle almost any financial crunch or emergency with very little actual effort on your part.

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