Financial Planning

Making and maintaining budgets is vital to prevent getting sucked into debt and needing debt management.

Many people hate the task of budget planning because they view it as overwhelming and frustrating. But it will make the task achievable if you look at it differently; an effective path to financially freedom.

Does it feel as though there is no chance to get out of debt and into credit, much less plan ahead for retiring from work or taking a break? Are you tired of getting your pay on Friday and being penniless by Saturday? Do you have lots of unnecessary products that you wish you had never bought? If this seems like you, we have got some good news.

There is a lot of guidance out there for you in different styles and you’ll be able to pick which one suits you the best.

One idea is to use applications like Excel or Microsoft Money. These are great options and resources for planning budgets. Money management software will take you through the process and let you put together or add new categories of where your money goes so you will be able to view the annual picture. It will then show you what you need to look at monthly so that you can be prepared. Budget software helps with your budget planning because it enables you see your money together, in addition to giving you prompts when it is time to settle your bills.

Actually, some computer programs will allow you to pay bills from your bank account. This is a great tool if you are trying to build your credit record. As you spend, you will be able to alter the categories; this will let you get a better understanding of where you require to reduce spending, or identify where you need to invest more.

Many financial applications often also have companion websites where you can set up an account and review your budget or savings. If you require something more hands on to get yourself back in credit, you have many possibilities. You can contact a credit counseling office in your neighborhood or online and identify what resources they have that you could use. Many offices have free courses about budget preparation.

Some people have such a hard time with planning a budget because they just do not know where their cash is going.

By getting it right, you’ll get to watch, a little at a time how your financial situation changes. Imagine that, by taking this action, you may some point in the future be stronger financially, or even own your own home.

The key is to take your time, do the process in small bites, and ensure that you take advantage of the assistance available. Remember that you are not alone but if you are already suffering financially, you should consider getting debt management help.

Are you trying to set yourself up on a budget so that your financial life is easier for you to manage? Do you want to know where your money needs to go each month so that you can plan correctly and take care of all your expenses? There are a few different theories when it comes to how to write a budget, but there is only one way to make sure you are not surprised by expenses you do not think about. Here is the correct way to write your budget.

You need to start with all of your expenses. This means you need to get a list of everything from your utility bills, mortgage or rent, car payment, insurance, to your license fees, car registration, oil changes, Christmas spending, birthday spending, and everything else in between. Anything that you spend money on in a years time needs to be included in your budget. If you forget about the quarterly or annual expenses you will be surprised by them and it will throw your budget off.

Next, you need to weigh your expenses against your income. Break any expenses that are not monthly down into monthly expenses to make it easier to work with. Then, you need to add them all up and subtract them from your income. The amount you have left is what you are allowed for savings, entertainment, and other things that are not necessities for your survival.

If you are not happy with the amount that is left over, then it is time to look at your expenses closely and figure out what you can live without. You might have cable television just so you can watch one show a week. Maybe that show is offered on the internet for free. Maybe you barely ever watch your television and that is an expense you can throw out. There are many other needless expenses that are usually in our budgets. Take a close look and eliminate anything that is not necessary for you.

Last, you need to figure out how much you are willing to waste on entertainment each month. This is your nights out, your movie rentals, and other things we do for enjoyment. There are many ways to make cuts here and still have a great time. You also need to figure out how much to save for general savings, vacations, emergencies, and other things you might be saving money for. This is how to write a budget the correct way and make sure you do not leave anything out.

In the wake associated with the worldwide economic depression, the necessity for all of of us to plan our finances considerably better is all too apparent.

Yet how many of us really possess a budgetary strategy for our individual lives? Plenty of of us go to work and have budgets and financial targets set for us, objectives that typically help make other folks much better off! Yet out of your office, very few of us actually set any form of personal goals for ourselves, and we ponder the reason why we do not get wealthy!

Probably you simply don’t know where to begin with budgeting your money

In general we spend on things we do not truly have to have, and we do not really look around for better deals as we ought to. Spending on credit cards is all too simple, it doesn’t really feel like real money when we hand our cards over. Direct debits make it simple for us to roll payments over on an continuous basis, so that when we get renewal notices we just go ahead and continue because we do not really have to do anything for it to happen!

If we were to take action and set ourselves the right financial plans and budgets, we can in all probability save ourselves a lot of money annually. Therefore precisely why don’t we? We would likely never hand over our money to other people in the street, however we are satisfied to permit cash to move out of accounts to organizations when we over pay for a utility or purchase things with out obtaining the best price on offer!

It genuinely is astonishing how significantly a personal financial spending plan can boost your wealth. If you were to invest each and every dollar you saved or earned extra as a direct consequence of your financial plan, you would likely be very shocked by just how much the average person could accumulate in two to five years.

If you wish to increase your financial worth, you need to plan your finances. Many of us don’t mainly because it’s just too much like hard work. Well with the financial budgeting software products that are on the market these days, that’s just not really correct any longer. In fact, budgeting and planning can be fun and hugely motivating when you discover the amounts you can actually accomplish.

Consequently should you want to be richer in life, begin planning. What gets measured gets done! Should you don’t have a financial plan, you can be darn sure you won’t accomplish it! Stop wasting money and begin planning!

Definition of a Budget

According to Merrium-Webster’s online dictionary, a budget is “a statement of the financial position of an administration for a definite period of time based on estimates of expenditures during the period and proposals for financing them b: a plan for the coordination of resources and expenditures c: the amount of money that is available for, required for, or assigned to a particular purpose”.

That’s a really long sentence to say that a budget is a list of all your incoming and outgoing money. The big question is why should you have a budget and exactly how complicated it is to make a budget. For me, understanding and completing a budget was simple. For my best friend, it was one of the hardest things she has ever done and I ended up sitting down with her and helping her figure it all out.

It surprises me how many adults have no idea what to do with a budget. I’ve heard so many people talk about how hard it is to make a budget or if they have a budget, how hard it is to keep to it. My philosophy is KEEP IT SIMPLE!!! I have read a few articles and even a few books on budgets and they always start off with telling you to keep tract of every dollar you spend for a week or month. Then they tell you that you need to understand how you spend to know how to make your budget. Some tell you that you have to cut back on all the pleasures in life and not spend a dime more than you absolutely have to. I’m not going to do that. Have you ever heard of KISS – Keep It Sweet & Simple? This is my version!

Guidelines of a Budget

There are a few basic steps of making a budget and a couple of intermediate ones. For anything more complicated I suggest finding an accountant as I have no knowledge beyond the basics.

Step 1: Make a list of all your bills

Do you have credit card bills, house payment or rent, car payment, car insurance, cell phone and house phone bills? How much gas do you use in a month? How much do you spend on food at the grocery store, at a restaurant, in fast food? Do you pay for internet or a gaming site? List anything and everything that you pay for every month. This is your monthly bills.

Example: My Monthly Budget

Rent – $635.00, Car Insurance – $90.00, Car Payment – $100.00, Cell Phone – $40.00, Internet/Cable/House Phone – $150.00, Gas – $100.00 —– TOTAL: $1115.00

I’m lucky in the fact that I have a roommate and she pays the electric, water, food (Food Stamps) and part of the rent. Also, I’m buying my truck from my brother, which makes my car payment really low. That being said my bills for the month total $1115.00.

Step 2: Make a list of all your income

How much money do you bring in a month? Do you have a job, food stamps? Make a list of every way you get money on a monthly basis. If it doesn’t come in every month, don’t list it.

Example: My Monthly Income
Paychecks: $1340

I bring home $1340 every month. This reflects my net pay (after taxes and deductions). Make sure you only use your net pay while making your budget or you will run out of money before getting all your bills paid.

Step 3: Retirement/Saving

In step one, I asked you to list all your outgoing expenses. When you made your list, did you think about your savings account and retirement? Even if you are 18 years old, it is never too early to think about your retirement plans. Saving just ten percent of your paycheck, can mean that you can retire on time and without having to have supplement income (another job). Also, in the immediate future, what happens if your car breaks down, do you have enough money to fix it?

Example: My Retirement/Savings

Savings: $50.00

For my retirement, my job has a 401K that I invest in. That money is taken out of my paycheck before my deductions, including my taxes. So, the $1340.00 you see above doesn’t include my retirement plan. As for my savings, I put $50.00 a month into savings. It doesn’t seem like a lot, but in one year, I have $600.00 enough to get a new tire or battery if necessary for my truck.

Step 4: Anything Else

Have you started thinking about a new hobby or want to have money for a current hobby? How about going to the movies or out to eat? There are a lot of little things that we like to do each month that add up to a lot of money. You can easily afford a few of these if you take them into account now. If you find you don’t have enough money for all of them, then make a fun fund. This way you can pick and choose with the limits of your fun fund, which hobby/movie/dinner for that month.

Example: My Hobbies

Fun Fund: $25.00

I love to make chainmail jewelry. It’s an obsession. I can walk into Michael’s and spend $100.00 or more if I’m not paying attention. My fun fund is $25.00 a month. I only make it $25.00 because I know if I have any money left in my budget, I will be adding it to this fund first.
Of course, by this time all my bills are paid and I have money to make it through the end of month. That money is mine to play with anyway.

You ask why make this fund in the first place. That’s easy, that extra money may end up going to something else because something unexpected happened. This way you still have some fun in your life. That is part of being responsible. You have to think about your mental health as well as your monetary health.

Step 5: Mathematics (Adding and Subtracting Only)

Once you have all your expenses, savings, income figures out, now comes the mathematics. Add up everything that is income, then add up everything that is outgoing (including savings/retirement – it is outgoing because you don’t have it available for this month’s bills). This will give you a balance.

Example: My Math
Paychecks: $1340.00 – (Bills: $1115.00 + Savings: $50.00 + Fun Fund: $25.00) = $150.00

That leaves a balance of $150.00 for me to use however I want. If it is a good month and I don’t have anything unexpected come up, I’ll take it to Michael’s or The Ring Lord (my chainmail ring wholesaler).

Last: The Hard Choices

If for some reason your balance is a negative number, you know you need to cut something down or out. Do you really need the mega cable package? Would drinking less beer each month cut down on your grocery bill? Do you really need to spend that much on your hobbies? Is having three MMORPG subscriptions really necessary or will just one due?

If you have cut your budget as much as possible, and you still have a negative balance, maybe a new job or second job is necessary. That is your decision to make.

So, it’s really simple. Add up expenses, including saving, retirement and fun fund. Subtract that amount from how much you bring in each month. Positive number – Have Fun! Negative number -Cut Expenses!

In August, I spoke at SAHRA’s (Sacramento Area HR Association) monthly luncheon for members on “Emerging Trends in Compensation.” Part of the presentation revealed projections for 2008 salary budgets that appear to continue to follow the modest salary budgets of the past 5 to 7 years in terms of hovering just below 4%. World at Work is projecting a salary budget of 3.9% for all employers in multiple regions and industries.

Smaller companies reported the highest actual salary budget increases this year at 4.1%. And the largest companies with more than 20,000 employees have a budget of 3.7%. Yet the public administration sector continued to creep ahead of private sector companies with a 4.3% salary increase budget (in addition to offering richer benefits packages for employees). No wonder it’s so tough to recruit employees in cities with a lot of public sector jobs, such as Sacramento!!

A practical tip you might use is to pay specific employee groups different percentage merit pools based upon movement in the market. Example: your IT department is scheduled for a 4.3% merit budget, your administrative employees receive a 3.7% budget, and your production employees receive a 3.5% budget. The overall percentage equates to the dollars stipulated in the 4.0% overall ’08 merit increase budget. Under this scenario, you’re still able to reward some employee groups at a higher dollar amount yet stay within your overall budget. You can also better reward your higher performing employees within those job groups.

So you may rightly ask, in view of increasing employee benefits and gasoline prices in a tight employment market, why do salary budget increases remain modest? It’s because there is a direct correlation between the cost of benefits and the size of a company’s merit budget. There are only so many dollars a company can afford to spend on their pay and benefits for employees. So when the cost of benefits increases, it serves to contain the cost of wages. The company has to split the “pie” into a finite amount of “pieces” and if the cost of benefits claims a higher percentage of the pie, there’s less to go around for the wage increases.

As the competition for qualified applicants intensifies between employers as boomers begin exiting the workplace, expect job applicants to request richer starting pay packages. Particularly for qualified professional and technical applicants for which managers are experiencing increased difficulty in sourcing and recruiting, initial pay packages may include a sign-on bonus, and/or a commitment to a performance review with a possible pay increase after six months of employment. Variable pay continues to be an ever increasing method used by companies to increase total compensation while containing costs.

The long term impact of bringing in new hires into your company at increased base pay rates in comparison to those of current employees creates compression in pay rates between new hires and “older” staff. Eventually you’ll have to upwardly adjust the pay of your longer term employees to retain them and remain competitive in your compensation practices.

Until the cost of benefits flattens or until the labor market tightens as boomers continue to retire and drive the cost of wages higher, you can expect the salary budgets to remain around the 4% mark. And it doesn’t appear that there is any short-term relief in sight…..

Copyright 2007, Regan HR, Inc.