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Personal Budgeting Tips

Personal budgeting is a money management tool that shows you what money you need to make ends meet, live comfortably, and increase your wealth.

In tracking your money, you found out what you have now and what you can reasonably expect to earn. In tracking your spending, you found out what your typical pattern of spending is. This information is critical to developing a practical personal budget.

However, before you tackle personal budgeting, look at some of the reasons why personal budgeting often fails.

1. Failure to prioritize expenses.
2. Failure to budget practically for normal out-of-pocket expenses like groceries and gas.
3. Failure to plan for the unexpected.
4. Failure to include quarterly or annual expenses.
5. Spending more money than you pocket.

Listing Expenses
Start personal budgeting by first listing and then prioritizing your expenses. Although most expenses are monthly or weekly, some expenses are annual, semi-annual, quarterly, or just plain unexpected. In addition, some expenses are discretionary.

Discretionary expenses are part of your normal out-of-pocket expenses - the things you typically buy that you could live without, but chances are you won't. Failure to budget for discretionary expenses is one of the top budget busters.

The Unexpected	- Home repair & maintenance - Medical bills(Doctor, Dental, Eye care, Chiropractic, Prescription Drugs) - Vehicle repair & maintenance
Annual, semi-annual, quarterly	- Homeowners' Association fees - License renewals (drives, vehicles) - Professional fees (accountants, attorneys, tax preparation) - Property taxes - Insurances (life, home, health, auto) - Water bills
Monthly	- Credit card payments - Household rent or mortgage payments - Internet Connection - Phone - Television Cable/satellite connections - Utilities (heat and electric) - Vehicle leases or payments
Weekly	- Child Day Care - Groceries - Personal Care (clothing, bath & beauty, toiletries) - Transportation (bus, gasoline,) - Savings
Discretionary expenses	- Books, entertainment, impulse purchases, snacks, dining, vacation & travel, membership fees...

Prioritizing Expenses

• Top priorities on any expense list are food and shelter. Shelter includes your rent or mortgage payment, real estate taxes, and any home association.
• Next in line are essential utilities like heat, electricity, and water service.
• Car loans or lease payments and car licensing fees are essential to your budget if your vehicle is essential to your job.
• Home insurance (if not a part of your mortgage payment), or renter's property insurance, vehicle insurances, and medical insurances should also hold a place on your list of priorities.
• Along with discretionary expenses, low priority expenses include unsecured loans, and credit card payments. Make sure your personal budget takes care of essential expenses and then consider the rest.

Practical Personal Budgeting
You may have calculated this when you tracked your money, but if you didn't your net income is the money you take home each month. (If you're paid weekly, multiply your weekly take home pay times 13 and divide by three to calculate your average monthly income.)

List your expenses by priority. List the total amount of each expense and the date it is due.

• Transform weekly expenses into monthly using the same method you used to calculate your net income.
• Divide annual, semi-annual, and quarterly expenses by 12, 6, and 3 to calculate a monthly figure for your budget. If these expenses aren't due this month, add these funds to savings.
• Use data from tracking your spending to determine your discretionary expenses.
• Include a monthly figure for the unexpected. If possible, find receipts, total them, and divide them to determine what is practical to expect from the unexpected. If nothing unexpected occurs during the month, add these funds to your available cash next month.
• If you're not saving regularly, do budget money for saving. Having a money reserve (savings) to fall back on in an emergency can make or break your budget.

Making Your Personal Budget Work for You
When you begin personal budgeting, it's not uncommon to find your expenses total more than your income. Always take care of top priorities first. Then work on making practical decisions for the rest of your expenses.

1. If you don't have enough money to take care of the priorities, you will need to find a way to generate more cash.
2. If an expense isn't a priority, roll it into next month's budget. However, if you can't pay a bill or meet a minimum payment, do contact your creditor and let them know. Tell your creditor when you will be able to pay the bill, they'll usually be willing to work with you.
3. Look over discretionary expenses and see what you realistically are willing to sacrifice to make your budget balance.
4. Can you cut down on groceries and personal care items? When shaving dollars from these expenses, consider purchasing generic items and store brands for a few weeks (or months) until your budget is under control.
5. Could you carpool or take alternate transportation for a couple of weeks to save on vehicle expense?

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