Spend less than you earn

DO YOU find yourself wondering where all your money has gone before the end of the month ?

DO YOU find yourself wondering where all your money has gone before the end of the month ?

There are things we can all do to help ourselves out of such a situation. Listed below are the steps to follow, with a brief discussion of each step:

l Determine monthly take-home income;

l Understand all bills and expenses;

l Track your expenses;

l Build up savings and retirement;

l Spend less than you earn.

Determine monthly take-home income

Whether you are a single individual or a family, you need to determine how much money is being made each month.

If you find that you are spending more than you are making, then some serious decisions need to be made.

There are three options.

Get a second job to supplement your income, get more education or training in something to get a better paying job or decrease your spending.

Understand bills and expenses

Account for your bills and the money you spend during daily activities. This can be done by saving copies of paid bills and recording daily expenses in a notebook. Once or twice a month, take an inventory of your expenses. Daily expenses would include all money paid out, except monthly bills.

Track your expenses

Create a budget . Next, create categories in your budget that will allow you to micro-manage expenditures.

Have categories such as food, insurance, transport , school fees, clothing, savings and so on .

After you have determined what your monthly take-home income is, you need to divide it up between your categories. The total amount placed in all the categories needs to equal your take-home income. The key to making tracking effective is to enter expenses regularly and stay within the amount allotted in each category. If you track your expenses effectively, in just a few months' time you will find areas where you might be able to make changes and save money. You will notice how much money is spent on frivolous stuff. Following a budget and tracking expenses takes inner commitment to be effective.

Savings account and retirement

A big part of any budget should be setting aside money into a savings account. Money in a savings account provides a cushion in case of an emergency, loss of employment or disaster. The amount that should be set aside will depend on your circumstances.

The important thing is to start. Over time, your savings account will grow larger and accrue interest. As your employment circumstances improve, you may want to increase the amount you are saving.

It is crucial to save for retirement. You can do this through a pension fund at work or through a retirement annuity. You may want to seek advice from a financial expert.

Spend less than you make

This has been a age-old problem. People in general have a tendency to spend more than they make. It takes strength and commitment to live within one's means and to save for a rainy day.

A simple rule of thumb is to spend less then you make and save as much as you can. This practice does not have to be done overnight, but steady improvements will yield great financial dividends.

Setting up your budget takes time and effort, but can be very rewarding. Getting in control of your financial future can be done with the help of a budget and some personal discipline on your part.

Good luck in your budgeting endeavors. - simplejoe.com