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Thursday, October 18, 2012

The Importance of Budgeting

All of the political debates and articles about the economy makes me realize how important the common budget really is to us.  I opened my first checking account when I was 15.  I bought my first car with $600 cash I had saved, or I should say, my mom helped me save up from birthday money I had received from the time I was 1 years old.  That first major purchase began my journey of owning a checking account, getting a job and budgeting.

My mom played a major role in teaching me how to spend and save wisely.  I remember sitting down out the dining room table, going over my first checking account statement and balancing the check book.  I think from that point on, I was a financial nerd.  Nowadays I love using MS Excel to set up my budget.  A couple years ago I heard about which is also a great spending tracking tool.  But the old-fashioned lined notebook and pencil also works fine too.

The key to a good budget is making sure every penny has its' place.  That doesn't mean we're living paycheck to paycheck, it just means that we know where all the money is being spent.  It's not really all that hard to set up a budget on paper, or computer, but I do admit, it's hard to follow through with the actions of spending the amount written instead of what we want to spend.  I'll talk about spending habits in a future article.

Now, to setting up the budget, there are three major areas of focus:
  1. Income
  2. Outgoing (spending)
  3. Savings
Some people may get discouraged when their income seems so low and once they start calculating it out, it seems they don't have enough to cover all the bills.  Well this is how many of us, our country included, have gotten into debt.  Don't get discouraged.  I was at a point in my life where I was a single mom with three children, receiving no child support and at a lower level income job.  I was too prideful to receive government assistance.  I admit, I used credit cards for things like car repairs and medical bills.  But I managed to pay all my bills on time.  This is why there is a process to financial planning.  The beginning of the process is setting up the budget.  The next steps are to make sure to have good financial behavior and then to shop wisely, which I will explain more in the future. 

In the mean time, stay focused and start setting up the much needed budget!

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