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If you're unhappy with your financial situation, a personal budget could be the key to resolving your problems and getting back on track. Most people cringe at the words "personal budget," and hardly anyone looks forward to creating and using a budget. However, once you start and use a budget, you'll be amazed at the change in your financial life. As you look over your finances, particularly if you're struggling with debt and having difficulty just stretching your paycheck until the end of the month, you may feel it's hopeless. But by budgeting carefully, you can, and will, create a positive financial situation out of what looks like chaos. To start your budget, go through your most recent credit card and bank statements and list the categories you spend money on. These include necessities like rent or mortgage and food. They also include other categories like entertainment and personal purchases like books or music. At this point, simply list each category. Next, figure out how much you are currently spending on each category. Just get this down on paper so you can look at it honestly. The most important part of creating a budget is knowing your current situation. Taking an honest look at the way things are helps you create what you want. List all of your categories again, on a new sheet of paper or in a new spreadsheet or document. Now, determine a new amount for that category, based on the money you actually have coming in each month. The bottom line on your budget must be equal to, or less than, your monthly income. From this point on, you're going to concentrate on living within your means and paying off your debt. If your budget comes out over your monthly income, you'll need to make adjustments in non-essential areas to make it fit. Keep in mind that you need to live within your means, but you also need to live. Do not completely zero out categories like entertainment; just reduce those categories. Don't deprive yourself entirely of pleasant things, because you'll never stick to a budget like that. A good budget covers all of your essential spending, pays back debt, and allows you to have a comfortable life. Of course, comfortable in this sense may be relative, compared to what many people have when they live on credit, but you should be able to enjoy your life on a budget. Once you've created a budget, it is essential that you consult it and live within it. This may be difficult at first. Many people find that the easiest way is to put cash in envelopes for each category. When the cash is gone, that category is finished for the month. Others just record their spending in relation to their budget. Your first month living on a strict budget may be very challenging, and you may have the occasional slip off-budget. When this happens, just return to living within your budget and keep going. After one month, it should be much easier to consult and work with your budget, and you should find the process more natural. Don't let setbacks overwhelm you. Set your budget, do your best to live within it, and build your ability to stick to your budget over time. Within months, you will see a great difference in your financial situation. |
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