Take control of your finances by creating a budget

It's clearly a budget. It's got a lot of numbers in it.  ~George W. Bush

I know you have to be thinking that I am kind of crazy posting the quote that I did.  However, in 2008, it seems like the Government took this type of approach when handling the finances of the country.  Not only are we currently in a recession, but the current steps taken to get us out of this predicament is highly flawed.  I mean after all, we have given over 300 Billion dollars to companies and have no idea about what they are doing with the money.

As much as we would like to blame the government for all of our problems, that would be ignorant to do so.  I mean in retrospect, 2008 was a year that most Americans paid for previously bad decisions.  Whether it was being caught in the "oil" rush, buying the biggest SUV possible, taking out an ARM loan to re-finance the house or even buying the big screen TV on credit, Americans have learned this year really how vulnerable our economy and personal finances are.  The Jones's are no longer the family to be and keeping up with them is for the birds.

We are far from the times of good job security as many people on Good Morning America reported that they feel like they were "disposable" once they were laid off by their job.  However, there is a silver lining, going through these times helps us to reconsider how we evaluate ourselves.  We learn new and improved ways to define ourselves and not tie ourselves down to nothing more than a specific job.  

2009 is a new year and the mood of America, based off the latest choices we have made as a country, demonstrates that it is time for a change.  We are moving from a consumerist nation to a nation who is re-taking control of our personal finances.  It is time to get back to making the choices that secure our financial future rather than impede it.  It is time to do what Americans do best: become innovative, make the best of what we have and change for the better.  

One of the best choices you can make to take control of your financial future is creating a sound budget.  Although this sounds like a daunting task, you can accomplish this by completing five steps:

1. Track Spending
   
• The most important step to developing a budget is tracking your spending.  This will allow you to identify holes of your income and help you isolate spending problems areas in your life.
• Steps to Track Spending
1. Each time you buy something, SAVE THE RECEIPT.  Even if it is a pack of gum, a utility bill or whatever, take the receipt and file it away in an envelope, a folder or a filing cabinet.
2. At the end of a 30 day period, collect each of the receipts and figure out general categories most of the receipts can be grouped into.
• Example of categories
1. Utilities
2. Mortgage/Rent
3. Eating Out
4. Gas
5. Groceries
6. Discretion Funds
7. Savings
8. Retirement
3. Once you have developed your categories, use a spreadsheet program like Microsoft Excel or Google Spreadsheets, put the date of the receipt and the amount into each category that is most applicable to.
4. Add the totals of each category and develop your estimated monthly expenditure for each category.
2. Prioritize
• For most of us, budgeting will require us to make sacrifices in order for us to abide our plan.  Whether it is cutting back on eating out so we can save more for retirement, or wearing sweaters in the home so we can lower our gas bill to spend more money at our discretion, we have to prioritize what is important to us.
• The most helpful thing you can do to help with prioritizing is develop a goal or an end point of what you hope to accomplish.
3. Be Realistic
• Although most people have good intentions with the initial development of a budget, a lot of time people fail due to having goals and expectations that are not realistic.
• Rome was not built in a day and neither will having the "ideal" personal financial situation.
• Patience is your friend and just by following a well thought plan, you will be able to eventually reach your goals.
4. Use Automatic Accounting
• Automatic accounting automates your budgets.
• Not having to worry to about your money and actively touching it can reduce the stress in money management.
• See the following article for more information about "Automatic Accounting".
• Automatic Accounting
5. Evaluate and Re-evaluate
   
• Although you may invest a lot of time to develop your initial plan, things change.  You may get a pay increase, you may lose your job or you even may take on a new financial responsibility.  
• There has to be a re-evaluation period that takes place to look at your current plan and make changes to accommodate whatever new changes you experience in your life.

Although many corporations are really hurting right now due to this current economy, some are still staying afloat.  They accomplished this by determining a budget that was tailored to their personal situation and stuck with a sound plan that continues to work for them.  In addition to that, they took the necessary steps to adjust to the current economic situation.  Unfortunately, many companies that tailored themselves to become more like their competition and did not change from their ways have caused them to fail.

Remember, 2009 is a new year and it is time for you to take control of your situation.  It is no longer a time to make excuses or blame our current situations on someone else.  We must hold ourselves accountable for the decisions that we make.  Starting today, make a decision to change for the better.

Stay Disciplined!