Companies use them to control spending, which is important for consumers, too. Budgets are easy to create, but sometimes hard to follow.
With today’s skyrocketing prices for everything, it makes good sense for everyone to have a budget. These useful tools are not only intended for businesses to control spending. They also help individuals know how much disposable cash they have. What is disposable? It’s how much paycheck is left over after the essential bills have been paid, such as rent and utilities. These are bills that if not paid, the amenity can be shut off or taken away.
It’s not always easy to know how much disposable income an individual has, but there are certain expenses that are constant and can be tracked. Rent and cable, for instance, are usually fixed, while electricity can fluctuate from month to month. The best way to handle keeping track of variable expense is to take a year’s worth and average the total amount. For instance, add up all months and then divide by 12 to get a monthly average.
Quicken and Mint help with Budgeting
The best thing that can be recommended for anyone who needs to keep track of finances is to use Quicken. It’s relatively cheap for their basic version, and an excellent tool for finding out how much money is spent, making tracking it all that much easier. There are also free Quicken alternatives that can be tried if spending money is not an option.
Another free option is to use Mint.com, which has recently partnered with Quicken to give users a chance to instantly track their finances. Of course, this only works for those who use banks with online access. Since this applies to the majority of bank users, more and more people are going the online bank route. The only drawbacks are that users must give their private banking information to Mint in order to be kept up to date on their spending. This can be a major turnoff for some.
The manual way of keeping track is to use a spreadsheet (i.e. Excel) on a home computer and a checkbook register. Start the spreadsheet with how much net earnings are brought in (don’t use gross salary, since that is before taxes are taken out). Then subtract rent, electric, cable, utilities, phone, and anything else that is paid every month. Going by how much was spent on groceries, an average can be estimated for that as well. Once all that is taken out, the rest is disposable income. This is what can be used to either be saved or spent on entertainment or luxuries.
Budgets Only Help if They are Followed
If the remainder is negative, a bigger issue must be fixed. That means that the individual is spending beyond his/her means. A second job must be found and/or some expenses must be cut out. Amenities that are not essential are the first to go. Many people have things on their cellphones or cable bills that are unnecessary. Make sure you use all your minutes on that phone. If not, drop it to the lowest available number. That will save at least $10 to $20 a month. Getting rid of premium channels can drop a cable bill by over $20.
Every little bit helps. Sometimes price shopping with different companies will lighten the load, or even threatening to leave current providers will get you better deals. There is no reason to let things like this put a drain on an individual’s finances.