MollysBrother.com

How Can I Save? How Do I Create A Budget?

Many readers who swing by my site feel overwhelmed at the very thought of educating themselves financially. I understand how frustrating it can be.

I was once in your shoes. I set out to develop a clear understanding of the basics of personal finance and home budgeting. I was trying to find a plan of action to follow to get my spending under control. Here we are, over a year later, and I have been able to do it. Unfortunately, I had to spend too much time using Google and finding websites like bankrate.com that helped me understand the seemingly mysterious world of finance.

To get your spending under control, we have to start with these three basic steps:

[tag]Track Your Spending[/tag] I know. Everyone says to track your spending and this was the step I most resisted but it also was the step that turned out to be the most helpful. I resisted and resisted tracking my spending for so long. Why? Because, quite frankly, I did not want to know what I was wasting my money on. You must attack this step most vigorously, otherwise you don’t really get a handle on where your money is going. I suggest you track your spending in a little Meade Memo book that you can carry in your pants pocket or throw in your purse for about thirty to forty-five days. Tracking your spending curbs your spending too. You think twice about buying that coffee when you have to jot it down in your little notebook.

Creating a Monthly Budget After you’ve tracked your spending for the month, it’s time for you to create a monthly [tag]budget[/tag]. I had no idea what I was doing and floundered with creating a budget for months. I tried and I failed. Until I heard [tag]Jean Chatzky[/tag] on Oprah. She suggests using the following as a template for a monthly spending plan. Note that the percentages reflect your take home pay, not your gross income.

• 35% Housing (Mortgage/rent, insurance, any household bill)
• 15% Transportation (Car payment, car insurance, gas, maintenance)
• 25% Other (Eating out, vacation, clothing, entertainment)
• 10% Savings (Although I aim for at least 15%)
• 15% Debt (Get rid of it. Not including car payment or mortgage.)

You should be spending NO MORE than the percentages listed. If you are, you might want to rethink some of your expenses as you might not be able to afford it.

Pay Yourself First This is not as difficult to do as you might imagine. Every payday, before you start paying your bills, aim to send off 10% to 15% of your paycheck to your savings account. If you can’t do that amount, start with what you can. Savings are built one dollar at a time. If you can do more than 15%, you don’t need me!