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October 25, 2007

Your Personal Budget

By Vanessa Cohen

Do you live from day to day and paycheck to paycheck? Do you wait to get paid so that you can pay off your current debts? If you said yes to one or both of these questions, chances are you’ve never dated a personal budget. It’s time to start the love affair.

It’s important to not only date a personal budget; you’re going to need to marry one at some point. A personal budget will help you keep track of your money and figure out exactly how you managed to spend $3,000 in one month and why you have nothing to show for it.

Here’s how to start budgeting your money; and don’t worry, I’m not going to bust out any technical lingo on you. It’s best to simplify your expenses per month so that you end up sticking to it.

Budget breakdown by month

Personal budget tip #1

How much do you earn per month after taxes? I know it might feel like the taxman takes all of it away, but you do get something at the end of the day. This is the number that helps you pay everything off.

And if you do some freelance work for cash on the side, this also counts toward your income.

Personal budget tip #2
Credit cards

Ah, the wonderful piece of plastic that manages to put many of us in a state of despair when that bill arrives in the mail. And without a budget, it’s quite possible that your credit cards are taking you to a place well above your means.

If you can’t pay off the entire amounts on your credit cards every month, pay as much as you can without suffering for the rest of the month. And opt to pay off more of the higher interest rate cards.

Personal budget tip #3

When it comes to your car, just about anything can and will go wrong. When you budget your car payment, you need to leave a little extra cash for it just in case the brakes need changing or some jackass rear ends you.

As well, good old gas is costing an arm and a leg nowadays, and although you may not be able to pinpoint exactly how much you’ll need to give the guzzler, you can work out an estimate based on past experiences. From this point forward, keep all your gas purchases for the month in order so that you can work out a more precise number.

Personal budget tip #4
Home & amenities

Whether you rent or own, there’s money to be paid. Calculate your monthly rent or mortgage, phone bill, cable, electricity, and toiletries.

Again, it would be a smart move to leave a little extra money in this category just in case something goes wrong and you need to call the plumber over to fix your leak (I know it sounds perverse, but I‘m being serious).

And if you notice that your phone bill or toiletries purchases are out of control, find out what’s costing you so much and adjust accordingly. Do you really need voice mail? Is the $25 shampoo that much better than, say, the drugstore brand?

Personal budget tip #5
Cell phone
Although you may think of your cell phone as a “barely there” expense, if you look over your bill, you’ll notice that there are charges there and costs incurred that you could change in order to save a few bucks.

If you constantly text message, then get a package deal that features that. If you spend most of your day on the phone, then find a package that offers you a great deal on daytime minutes.

And start looking over your bill with a fine-tooth comb; you may be getting charged for things you aren’t even using.

Personal budget tip #6
Home insurance, car insurance and even life insurance are a necessary evil in your life (evil, that is, until you need it). To lower the cost of your insurance, shop around. You might be able to lower your insurance costs by 15%, and that’s a significant number considering you could be paying upwards of $1,000 a year. That’s an extra $150 in your pocket.

Budget your insurance costs on a monthly basis even if you pay it in one lump sum at the beginning of every year. That way you can put this amount aside every month.

Personal budget tip #7

Food glorious food! From grocery shopping to having sushi with the girls, if you have monthly habits that involve food, then you need to budget for them.

If you go out for dinner once a week, place that in this category. If you entertain once a month, place that in this category. And when you shop for groceries and your cat, Frisker, all that also goes into this category.

You may decide that you eat out way too often or that you don’t really need to buy cheesecake every time you head to Price Chopper. The numbers don’t lie (and neither do the freakin’ calories).

Personal budget tip #8

I know you wouldn’t imagine that savings are an expense, but they should be because you need to set aside a given amount (no less than $100) each month and place it into a savings account that offers high interest and will penalize you if you withdraw any cash.

Saving money is important, even if you’re young. Start saving today, even if the amount is less than $100 a month, at least you’re putting forth the effort to have something left should life throw a monkey wrench your way.

Budget your money, lady

A budget will help you become more responsible with your money and may even alter your spending habits. You need to develop this skill at some point, so why not start today?

Once you have a money plan in action, the world will become your oyster. And yes, the oyster will contain plenty of pearls.

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