5_Things_to_Know_About_Budgeting

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5 Things to Know About Budgeting Budgets The “B” word. Ugh When we mention budgets to clients usually heads start spinning and eyes glaze over. However budgeting is the core of understanding how to grow wealth. Understanding your own personal budget is the first step on the yellow brick road of wealth. Don’t let the Wicked Witch of the West stop you. Your budget is your pair of ruby slippers. Let’s set you on your road to Oz. 1. What Is a Budget A budget is an itemization of your expenses and income. It provides a financial description of transactions you make over a specific period of time such as a week or a month—or longer. A budget also provides an opportunity to do a self- assessment. Looking at how your income flows in and how your money is spent can provide a realistic storyboard of your life. 2. What Does a Budget Include Everything. Absolutely everything. Most importantly a budget includes your fixed expenses such as rent and mortgage payments and your variable expenses vacations concerts birthday presents. Yes I know this very difficult to monitor. And it can be overwhelming. No worries we can talk about that in the next paragraph. However the point I want to make here is that your budget represents you. It’s your selfie. And unless you’re using cash every day all the time it is the picture banks and credit card companies see. 3. What Are Some Tools You Can Use Well you can always be old-school and use pen and paper or an Excel spreadsheet. However there are a number of different apps that can make this process easier. These apps are connected to your bank accounts debit cards and credit cards. As a result you’re able to monitor in real time your income sources and spending patterns. These apps can provide you with your personal cash flow report. These different apps provide different perspectives therefore do some research.

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4. Using Your Budget as a Goal With data on your weekly or monthly transactions a budget can help you set targets or goals in specific categories. For example if your monthly transportation bill is a bit on the high side because of Uber you can set a reasonable target allocation for the month. Same goes for food entertainment and other variable costs. For the most part variable costs are where you’ll find the most opportunity to make the most changes. Using a budget will help you monitor these changes over time. What Do I Do With This Information As with all data use it to learn something. Are there changes you can easily make that will improve your financial picture Or perhaps you are well on your way to accomplishing a significant goal. Using a budget is an easy way to monitor your accomplishments. Think about this. Because your budget is your self-portrait do you think it adequately portrays who you want to be It was only after Dorothy had a better understanding of herself that she realized that the journey to Oz was really her path home.

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