Budgeting Your Way to Financial Freedom

Financial freedom cannot be achieved without budgeting. Budgeting involves tracking your sources of income and more importantly tracking your expenses. It is novel tool for controlling your expenses and making you aware of how you spend your money. At the outset, budgeting may seem to be onerous and boring, particularly for those of us who hate numbers. But once you realize the benefits emanating from it, you will find it an interesting exercise. Even businesses, whether small or large, use budgeting as a tool to achieve their financial goals. It is, in fact, an integral part of managing an organization.

Benefits of budgeting:

Helps to control impulse buying.

Helps to control your expenses.

Ensures that you pay your bills on time.

Helps you to borrow money when you need it.

Helps you by not defaulting on your loan repayments, thus, protecting your credit rating.

Helps you to save money which can routed to different investment vehicles that can in turn help you build your net worth over a period of time.

The budgeting process

The first step in the budgeting process is to determine your net worth.

Your net worth = the value of all your assets less all the liabilities or loans that you owe.

The second step is to identify your sources of income and the amount from each source. Your sources of income could be salary, business income, investment income such as dividends, interest, rent. Your most recent tax return and bank account can be an excellent source for identifying your income sources.

The third step is to identify your expenditure items such as groceries, entertainment, mortgage payments, loan repayments, housing repairs, transportation, taxes.

Prepare a spreadsheet with the following columns: a) description for each item in the two sections viz. income and expenditure b) actual amount c) budget amount d) difference (between actual and budget amount) e) reason to be given if the actual amount exceeds the budget amount.

It is very important to ensure that you provide at least 10% of your gross income towards savings. A formula should be in place in your budget spreadsheet that will automatically calculate 10% of your gross earnings. The objective of budgeting will be defeated if it does not lead to targeted savings.

Budgeting should generally be done on a monthly basis. It is very important for you to enter all the amounts that you spend into the spreadsheet. This will require a disciplined approach but in the long-run, it would definitely be worth it. Keep a separate paper file for each year divided into sections based upon the items of income and expenditure for filing your bills.

Read More Free Investment, Wealth Creation & Personal Finance Articles & Tutorials at: http://www.global-investment-institute.com/

The Global Investment Institute has been setup to aid people in the pursuit of a better lifestyle through managing their money effectively, investing wisely and wealth planning for their future.

---

More Money? My Cup Runneth Over...But Im Still Thirsty

Most of us, especially those of us who have debtor's... Read More

Basic Bank Accounts Failing the Basic Needs of Consumers

The lists of bank and savings accounts that are available... Read More

Personal Finance ? Why You Should Compare, not Despair

Sorting out your personal finances can be a tricky and... Read More

Benefits of Personal Finance Software

In this age of information, keeping track of your finances... Read More

Developing a budget? Watch out for Those Budget-Bursting Gremlins

If you've developed a household budget to get your spending... Read More

Creating A Household Budget

Creating a budget can be a very difficult task. Although... Read More

The Wright Place - Finances

Women have a love/hate relationship with money. Most of us... Read More

Banks Are More Than Just A Place To Park Your Money

If you've been to a shopping mall lately, you've probably... Read More

Debt Management ? Watch Out for Bank Fees!

During the last twenty years, banks have offered a number... Read More

Stretching Your Grocery Dollars

Shopping for groceries is an inevitable fact of our ever... Read More

Simple Ways to Save Money

Things are so expensive these days. We seem to be... Read More

Five Secrets for Long-term Financial Success

Future financial success is not a guarantee that any one... Read More

Adverse Debt Levels Blight UK Consumers Personal Finances

Debt levels are at an all time high in the... Read More

How You Feel Affects How You Shop & How Much You Spend

Have you ever stopped to think about how your "mood"... Read More

Saving Money - Are You Doing Enough?

It is estimated that we, as consumers, waste an average... Read More

UK Graduates Looking Short-Term At Their Long-Term Financial Responsibilities

With almost two thirds of university entrants from England and... Read More

Kundalini Lessons - Money

I've been going through and interesting growth period lately that... Read More

Save On Food - Ten Tips

To save on food, be an opportunist. Buy what you... Read More

Vacations Made Easy: Buying a Florida Investment Property

Vacations Made Easy: Buying a Florida Investment PropertyA relaxing beach... Read More

Save Money on Gas

Gas prices have soared to unimaginable heights of late. Since... Read More

A Fresh Start for Family Finances in 2005

While 40% to 50% of us make New Year's resolutions... Read More

Personal Loans For Homeowners ? One Of The Numerous Rewards For Being A Homeowner

You no longer look at the pictures of homes cause... Read More

Do You Really Need the Power of Money Management Software?

I have been a loyal user of Quicken(R) for more... Read More

Succession Planning

Have you ever thought about what you are going to... Read More

10 Steps To Improve Your Financial Situation

Here are ten steps you can follow to help improve... Read More

Your Dry Cleaner?s Double Standard

Women are charged more for dry cleaning services. Don't fume,... Read More

The Good and the Bad of Money Management

Good money management needn't be difficult. In fact, there a... Read More

Budgeting Before Buying

With interest rates being at an all-time low, I can... Read More

Why We Are Never Satisfied with What We Have

I have to admit, I do it too. I complain.... Read More

Make or Break Your Retirement!

The Prudential has dubbed those who refuse to leave home... Read More

Credit Card Debt ? Watch Your Credit Report and Your Bill

Most consumers are aware of the importance of their credit... Read More

Tips To Save Money At The Supermarket

Are you interested in saving money off your grocery bills?... Read More

Take Control and Master Your Kitchen

Those who keep a watchful eye on where their money... Read More