Friday, January 16, 2009

Day 17 FTJ Bootcamp Activity

Copied From Mommysavers(I'm loving all the advice):
Avoid Budgeting Mistakes

Now that you’ve got a clear picture what you spend, what you earn, and where you can cut back you can create your budget. When creating a budget, a lot of families make critical mistakes. Don’t set yourself up for failure! Here are some tips to ensure your success:

Pay Yourself
FirstDespite record amounts of disposable income Americans had a negative savings rate in 2005-2006 for the first time since the great depression. Making saving automatic can help you beat the statistics and set aside more of your income for the future. If your employer offers an automatic deposit plan, allocate some of your earnings to go directly into a savings account. If you don’t see it, chances are you won’t miss it. If you don’t pay yourself first, you’re increasing the likelihood that you’ll use that money on other categories.

Build in Wiggle Room
If you’re inflexible when devising your budget, you’re setting yourself up for failure. Allow for a financial cushion in each category so when fluctuations occur you’ll be covered.Budget for Emergencies/Irregular ExpensesEmergencies happen. Cars break down. Kids get sick. People lose jobs. Those are simple facts of life. It’s not a matter of IF they happen -- it’s more of a WHEN. Don’t act like a victim when life happens to you, but instead be prepared. Add a rainy day fund to you budget. If you don’t have one at all, it may help to start out with a goal of having $1,000 set aside. Then, as you build your fund and pay off debt, increase that goal to having three months’ of living expenses set aside. When you’re completely debt free and building up retirement savings as well, increase that goal to six months.

Budget for Irregular Expenses
Even though things like vacations, insurance payments and buying holiday gifts don’t happen every month, include them in your budget as well. Estimate your total yearly expenditure and divide by 12 to come up with your monthly budget.

Build in “Fun Money”
Some of the most successful budgets have a category for “fun money” – money that doesn’t have to be accounted for. It could be cash for sodas/snacks, lunches out, or whatever you want. This category can help prevent you from feeling “trapped” in your budget and having to account for every little expense. How much is in this category is really up to you and should fit your financial situation.

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