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How to budget your household accounts
It is so easy to despair when you encounter your first financial crisis.
You're not alone. Many people face a financial crisis some time in their
lives. Whether the crisis is caused by personal or family illness, the loss
of a job, or overspending, it can seem overwhelming. But often, it can be
overcome.
The important thing to bear in mind is, not to panic!
The most obvious first step is to prepare a budget and although it may
not be everyone's idea of fun it is nevertheless necessary if you are
to take the first step towards overcoming your financial situation.
Have you seriously considered preparing a budget? Not just a mental note
but a written exercise taking a long, cold, hard and truthful look at
your predicament.
It may sound a very obvious statement to make but the first step toward
taking control of your financial situation, is to do a realistic assessment
of how much money you earn and how much money you spend. The operative
word here being “realistic.” It may not be pleasant to be
so forthright about your own circumstances but if you choose to ignore
certain aspects then you are just deceiving yourself and the whole exercise
would become a complete waste of your time.
Start by taking a blank piece of foolscap paper and divide it into two
halves by drawing a line down the middle of the page. On the top left
side of the page write a heading of “Income” and on the top
right side of the page write a heading of “Expenses”.
Commence by listing in the “Income” column all your income
sources to include wages (full time and part time) for yourself and/or
your partner, rental income etc.
Next, concentrate on your expenses.
In the top right section of the page, list all your "fixed"
expenses — those that are the same each month — like mortgage
payments or rent, car payments, and insurance premiums.
Then, list the variable expenses — like groceries, entertainment,
recreation, and clothing
Writing down all your expenses, even those that seem insignificant, is
a helpful way to track your spending patterns, identify necessary expenses,
and prioritize the rest.
The goal is to make sure you can make ends meet on the basics: housing,
food, health care, insurance, and education.
Once completed, analyse your figures. Ask yourself some very hard questions!
“Do I really need to buy this item?” Do I have to have that
latest gadget?”
Sometimes, just by performing this very basic task you may find that
you can make some very obvious savings.
Once you have carried out this exercise, it is a good idea to go through
it again in a month's time just to make sure that your spending is not
reverting back to it's bad habits.
A useful suggestion would be to make use of your computer. Computer software
programs can be useful tools for developing and maintaining a budget,
balancing your cheque book, and creating plans to save money and pay down
your debt.
If you do not own a computer you can utilise your public library and
bookshops as they have information about budgeting and money management
techniques that you could find beneficial.
About the author
John Mussi is the founder of Direct Online Loans who help UK homeowners
find the best available loans via the www.directonlineloans.co.uk
website. |
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