Tere Stouffer - The Only Budgeting Book Youll Ever Need: How to Save Money and Manage Your Finances with a Personal Budget Plan That Works for You

To Maxie, who has her own smaller budget (doggie day care, chew bones, lots and lots of food), but deserves an even bigger one!

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, but sticking to any budget is extremely difficult.

The trick is to focus on the word realistic. It doesnt take much research or many difficult decisions to 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 is a tool, and like all tools, the results you get from it will be determined by how you use it. If you make a realistic budget and stick to it, you can watch your life move forward. If you set unrealistic budgetary expectations and dont even bother to follow through with them, dont think your financial problems are over.

Setting Budgetary Goals

Used correctly, a budget doesnt restrict you; it empowers you. Youre going to establish a budget because you have financial goals that are not being met. For example, you may want to:

• Be able to pay all your bills from your paycheckand maybe have a little left over
• Buy your first house
• Save for retirement but cant seem to find any extra money to get started
• Pay off all your credit cards and never get into debt again
• Give more money to your church or to other nonprofits
• Be your own boss
• Take a vacation
• Stop hearing from the hospital about your medical bills
• Buy a newor at least newercar
• Stay home with your baby
• Remodel part of your house
• Pay for laser eye surgery
• Finance at least part of your childs college education
• Buy health insurance
• Rebuild your credit
• Find a way to care for your aging parents
• Finally build your dream house
• Take a leave of absence from your job to work in the Peace Corps
• Go back to school and begin a new career
• Buy the downtown coffee shop when the current owners retire
• Get a whole new wardrobe

Are any of these your goals? If so, budgeting will get you there, even if the odds seem impossible right now. Even if youre stuck in a job you dont like, desperately want to go back to school, have to take care of an aging parent, and have $19,000 in credit card debt, you can meet your financial goalsjust as others have done before you. With a good budget, a little patience, and a whole lot of determination, youll eventually get there.

You might be tempted to answer this question with something clever like money. But if you do that, youre missing the point. Creating a budget isnt about having money; its about figuring out what youve got, what youre spending it on, and how you can realize your dreams.

In order to do this, youll need some basic tools.

A Computer

Of course, people made budgets in the days before computers, and you can still make a perfectly good one, sitting at the kitchen table with a pencil, a pad of paper, and a calculator. But why not do things the easy way? If you have a good, working computer, put it to work for you. Create a folder marked Budget (or something similar) so you know where all your files are going to go. If you have thoughts about your budget and about ways you can save money or extra sources of income you forgot about, note them down and toss them into the Budget folder. That way, theyll all be centralized, and you can get at them easily.

One note of caution here: youre going to be putting down in written form a lot of confidential informationnot your password to your online banking account or something obvious such as that, but certainly information about your finances that you might not want other people to see. Make sure your computers security systems are strong. If possible, create a password protection for your Budget folder so only you (or anyone else you authorize) can get into it. Remember, these are your dreams were talking about. You dont want anything to get in their way.

The Right Software

There are all kinds of financial software programs out there, each one claiming that its the only one you need. I wont recommend any one of them in particular, although if you decide to use one, get a clear idea before you buy it of what its offering. After all, youre inaugurating an era of responsible spending, so you dont want to purchase something that isnt exactly what you want or need.

On the other hand, you can bypass all those bright, shiny programs and just do the work and construct the spreadsheets yourself. Its not hardas youll see in the following pagesand if you have a quality spreadsheet program such as Microsoft Excel, youll be in good shape.

Spending and Income Records

One goal youre going to accomplish as you go through this book is keeping accurate and careful records of your expenses and income. However, its possible that youve not been doing that up to now.

Assemble all your bills in one place, possibly in a folder or other container so you wont lose any of them. At your local office supply store, you can find expanding accordion folders, each slot marked with the name of the month. These are great for keeping bills, since you can file them as they come in based on when theyre due.

In a separate folder or box, keep your pay stub records. This applies whether youre paid with physical checks or through direct deposit into your bank account. You need to see exactly whats coming in and when youre receiving it. Keep the stubs in the order in which you receive them. Also in this folder, keep stubs of any other checks you receive (tax returns, gifts, etc.) These records are essential both for budgeting and for tax purposes.

Most financial advisers recommend keeping your financial records for at least three years. This doesnt need to be a huge burden; just make sure you keep them sorted and somewhere you can have easy access to them if you need them. When it comes time to get rid of them, I strongly recommend purchasing an inexpensive shredder from an office supply store and shredding them. This way you minimize the possibility of identity theft.

BUDGETING TIP

One of the ironic consequences of the growth of technology has been that its easier for people to obtain illegal access to your records. There are a lot of things you can do to protect yourself against this (see