I'm on a mission to help folks become more financially fit, so I'm encouraging readers to start a budget. However, we'll call it a "Freedom Plan" because our goal is going to be to free you from financial stress and chaos. If you are one of the millions of Americans swallowed by debt, you need one. If you're one of the millions living paycheck to paycheck, you need one. Even if you have money to throw around, you should still have one. Why? Because you want your money to work for you! Financial freedom is at your very own fingertips.
The basic idea of the Freedom Plan is to find out how much you earn, verses how much you spend. If all goes well, you're earning more than you spend. If not, it's time to fix that problem.
*First, you'll want to find out where you are financially and set goals as to where you want to go. So, grab a pen and paper and start figuring out your net worth. Do this by comparing what you own, or at least the value of it (assets: house, cars, savings, other personal property) to what you owe (liabilities: mortgage, auto loans, credit card debt, etc.). Hopefully, you have more assets than liabilities, but if not, you're not alone and you CAN turn that around.
*Then, you'll need to track your spending for at least a month. Whether you use cash, checks, credit cards or debit cards, make a note of every purchase you make, even the twenty-five cent pack of gum. Also, track all of your income. This is just to make you aware of where your money goes each month.
*At the end of the month, put all of your expenses into categories, Fixed (the ones you pay every month like Rent, Utilities, Car Payment, etc) and Variable (the ones that change every month like Gas, Eating Out, Movies, etc.)
*Next, take a good look at where your money has gone. (Pay close attention to the Entertainment and Eating Out categories!) If you're spending more than you earn, you'll need to find ways to cut back on the variable expenses. If after cutting back on your variable expenses you find you are still paying out more than you earn, perhaps you'll have to take more drastic measures like getting another part time job, moving to a less expensive home or selling a vehicle, for example. If you aren't an over-spender, you might like to try to cut back on your expenses just so you can put a little extra in your savings account each month.
*Finally, make the necessary adjustments to your spending and put it on paper!! Housing should generally cost you less than 40% of your income. The Food and Auto categories should fall into about the 15% range. All other categories should run at about 3-5% of your income, but you should adjust it to fit your current needs and work toward whatever goals you have set for yourself. Don't go over 100%, though!
These simple guidelines should help you begin your journey to financial freedom. Remember, if you take control of your money now and not spend so frivolously, then later, you'll be debt free with lots of money in your savings account to buy what you want, when you want, free and clear. Whatever age you are or phase of life you're in, it's not too late to get started, so please, get on your way to financial freedom today!
Vicky Campbell, owner of Chaos County Organizers, aims to help you organize your world one task at a time. Visit http://www.ccoworld.com to request your free Info-Pak.
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