Tere Stouffer - The Everything Budgeting Book: Practical Advice for Saving and Managing Your Money--from Daily Budgets to Long-term Goals

THE

BUDGETING
BOOK

3RD EDITION

Practical advice for saving and managing your moneyfrom daily budgets to long-term goals

Tere Stouffer

Avon, Massachusetts

To Grandma, who believed that being debt-free was the surest route to a happy life.

1. Youve started a new job, whether your income is higher or lower than before.
2. Youre moving to a new house, buying a new car, or taking on any other major expense.
3. An unexpected amount of money has fallen into your lap.
4. Youve had many unexpected expenses and have spent an unexpected amount of money.
5. Youre expecting a baby, whether its your first or your fourth.
6. Your baby has grown up and is leaving the nest.
7. Youre getting married, moving in with your significant other, or expanding your household to include a parent or sibling.
8. Youve decided to end a marriage or other partnership.
9. Youre thinking about starting a new business or retiring from your old one.
10. You have a new financial goal youd like to achieve.

THIS BOOK IS CHOCK-FULL of solid adviceplus tips and tricksto help you reach your financial goals, no matter what your current financial situation is and no matter how lofty your goals are. Okay, so you may not be able to retire at age forty, especially if youre currently thirty-nine years old. But you can live a life free from the stress of dodging creditors and wondering how youre going to make your rent or mortgage payment, even in todays rocky economy.

Imagine the following as your future life. Every two weeks, on a Friday, your paycheck is directly deposited to your bank: a portion to your retirement account, a portion to your savings account, and a portion to your checking account. During the weekend, you pay the bills that will come due before your next paycheckand not only do you have enough money to cover all those bills, but you also withdraw some spending money for the next two weeks. Meanwhile, the money in your retirement account is increasing, and the money in your savings accountafter the six months salary you always leave in there for emergencieswill allow you to pay cash for the sofa youve had your eye on, that vacation youre going to take next summer, the baby youre expecting later this year, or any other great use for your money you can think of.

Sound impossible? Its not. With careful budgetingand a commitment to live within that budgetyour life can be exactly like the one just described. Between now and then, though, you may have to radically rein in your spending, aggressively pay down your debts, and begin to save. If your situation is serious enough, you may have to cease all spending for the next six months (or more). But at the end of that time, youll be well on your way toward developing a cushion of savings in the bank; planning for a new home, your retirement, and/or your childs college education; and having enough income to meet your needs each month.

To get started, first youll want to determine which part of your current spending plan is a high priority. Then, youll want to understand your overall financial picture, as it is now. Dont shy away from this step, even if you know that your financial picture is very, very bad. Knowing the full breadth of your assets and financial obligations helps you establish a budget that will change your financial picture from bleak to promising.

If youre having trouble balancing your personal budget, consider putting a temporary moratorium on spending. Youll likely also want to cut down on your existing financial obligations, small and large; immediately tackle your debt; and, if necessary, find ways to add income so that you can get out of debt even faster. There is advice here to help you live through unemployment and other budget challenges, including ways to get help from the government when necessary, as well as ways to get back on track if you have to start all over.

After that, you decide what other areas you need help with. Thinking about getting married or moving in with a partner? Worried about how to save for a new baby? Thinking about buying a house (and yes, you can save up enough for a 20 percent down payment)? Are you saving for your childs education? Found yourself separated or divorced, and arent sure what financial step to take next? Want to plan for retirement? Having trouble staying motivated? Its all here.

Budgeting. The very word can bring tears to your eyes. Yet, if you have any financial goalsany at all, from being debt-free to buying a house to retiring in comfortbudgeting is the single activity that will simplify and improve your life.

Establishing a budget is the act of deciding how much of your money youre going to spend on one item, how much on another, and so on, before youre actually in the position of spending the money. Sticking to a budget is the act of following through on those decisions. Creating a budget isnt easy, and sticking to your budget is extremely difficult.

The trick is to focus on the word realistic. Without doing any research, you may decide that youre going to spend $200 per month on food. But if youve never spent less than $500 per month on food, youll blow your budget right out of the water the first week. Instead, before you begin deciding on the numbers in your budget, youll need to fully assess your current situation, take a hard look at where you can cut back your financial obligations (both large and small), restructure your debt (if necessary), and see whether you can add income. Only then are you ready to decide realistically where every penny will be spent.

A budget isnt a straitjacket that keeps you from really living. On the contrary, a budget that you stick to can be your ticket to living the life you imagine. Living within a strict budget isnt easy, but neither is being heavily in debt, worrying about how to pay for your expenses, and living with the guilt that goes with spending money you dont have. Youve already done the hard part by living with financial insecurity; even though living within a budget isnt fun, it wont be any harder than that.

Keep in mind, though, that simply establishing a budget isnt the answer to your financial woes. Establishing even the worlds greatest budget wont make any of your financial goals a reality unless you stick to the budget and follow through.

People establish budgets because they have financial goals that are not being met. They may not realize that they have any goals at allthey may just be tired of bill collectors callingbut everyone who establishes a budget has at least one unmet financial goal. For example, you may want to: