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What Is A Budget and How To Get Started?: Budgeting 101

[pro-player]http://www.youtube.com/watch?v=nlBFfL44N0Q[/pro-player]
The dreaded ‘B’ word! There is absolutly no reason to fear preparing a budget. I think the reason why many people do is that they feel it is a lot of work, they don’t really know how to do it, and those that have tried have never been able to keep it (likely because it was done wrong).

Yes! It does require some work. The good thing is that with today’s technology it is getting less and less.

So what is a budget?

Simply: a budget is a record or projection of all the money coming into the house and all the money going out of the house. Another name for it is a cash flow statement. This makes it easier to visualise. Money flows in and money flows out, and flows out, and flows out…

Why is a budget important?

A budget is paramount to financial success! You need to know how much you have and what it is being spent on to be able to prioritise spending and allocate funds towards different goals. Whether it is retirement, traveling, buying a new car/house/boat, the kids education, pay off credit card debt, or maybe a wedding – you need to understand where you will be able to get the money to pay for these things.

How do you get started?

First – prepare yourself that in order to prepare a good (i.e. accurate) budget you (and your partner) need to set aside 4-5 hours of time to complete it.

Secound – Gather up at least the last three months bank statements and credit card statements! ALL THE CREDIT CARD STATEMENTS! Not just the ones you tell your spouse about 🙂 .

Third – Use this Budget Worksheet as a guide to identify the various categories to seperate out your spending. It is important to understand how much you spend on various items so you can identify where you may be overspending and can cut back.

Forth – Start going through all your statements line by line noting the category that each one belongs.

Fifth – Start fillling in the spreadsheet to determine how much you earn and spend every month!

Sixth – Once you have tallied up the income and subtracted off the expenses ask yourself this: I SPEND HOW MUCH?!?!

Be sure to read The Most Common Budgeting Mistakes!

Watch for my book “One Day A Month To Financial Success” due out October 2011!

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