SON SON
Like it or not, you deal with money every day. Some people deal with it better than others do. The difference is in their money-management skills. You’re not born with these skills; you learn them. And improvement comes with practice. Because you picked up this book, I know that you’re at least Somewhat motivated to start living on a budget so that you can take control of your spending and start saving. Creating a Budget takes a practical look at the many phases of creating a budget. You’ll find information that you can use to pursue better management of your money so that it can go further and lead to investments that provide greater financial security.
Your budget is a financial map to help you reach your financial goals, and it’s useless unless you know where you are now and where you want to go. Determine your current financial situation by taking a thorough survey of your current financial status.
When budgeting, people usually think of “worth†as cash in the form of salary, savings, checking accounts, and so on. But you can make a number of decisions about anything you have that has value, and each of those decisions affects your financial worth.
How much money do you take home after federal taxes, state taxes, local taxes, and social security deductions? (Most people budget on a monthly basis, but if you get paid weekly or semi-monthly, you may want your budget to reflect that income pattern.)
You may want to include temporary, part-time, or seasonal income in your budget. On the other hand, you might choose to treat that extra income like “found money†and put it directly into your savings or investment plan. With the benefits of compound interest, such mini-investments may have a significant impact on your future. I discuss compounding (interest that is paid on interest already earned) later in the book so that you truly understand the benefits of forgoing small pleasures now for giant rewards later.
How much money do you have in a bank, savings and loan, or credit union savings accounts? Do you have a money market account? Certificates of deposit, A Christmas club account? For the purposes of figuring your financial worth, your savings list includes all liquid assets, or assets that you can readily turn into cash. (If you find that you have too many accounts in too many places, try consolidating them into fewer accounts. By consolidating, you can save fees, make tracking your assets easier, and make more money with accounts that pay higher interest).
One reason some individuals and families find it hard to set goals is that Americans generally are not good at looking at money in terms of long time lines. When you buy something that you don’t really need because it costs “only†$30 a month, you’re ignoring the total cost, which includes interest.
When you think about savings, you may see saving $30 a month as an awfully slow way to accumulate assets because you ignore interest compounding (discussed in Chapter 9). But saving is like the woman who, at age 47, hesitated to start medical school because she would be 51 by the time she got her degree. She finally decided to pursue her dream when her counsellor pointed out that she would be 51 in four years, whether or not she went to medical school.
Setting goals is more than just writing down a dollar amount. It’s a way to ensure that you will not only enjoy your dreams but also enjoy the pursuit itself and the forward steps you take along the way. Goals are usually divided into short-term, mid-term, and long-term goals. These terms mean different things to each budget planner, depending on where you are on your life’s path.
Budgeting is not denying you pleasures and happiness. Rather, it is creating a financial plan that ensures that you’ll have a joyful life at every age. Consider, for example, the current trend toward designer coffee. If you pay $3.75 to $5.50 every workday for 48 weeks a year, that little pleasure will cost you $900 to $1,320 a year! Add an expensive gourmet roll to that, and the amount can double. Five minutes after drinking the latte or the company mud-brew, can you really recall what either tasted like? Get something memorable for your money!.
You can set short-term goals for as soon as next week or as far away as next year. These goals may include paying for a vacation, buying a new stereo, or being able to attend your brother’s wedding on the other side of the country. Or they may be stepping stones on the way to longer-term goals, such as accumulating a down payment for a home or car or starting a child’s college fund.
You can set short-term goals for as soon as next week or as far away as next year. These goals may include paying for a vacation, buying a new stereo, or being able to attend your brother’s wedding on the other side of the country. Or they may be stepping stones on the way to longer-term goals, such as accumulating a down payment for a home or car or starting a child’s college fund.
By Ro Sila
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