Sunday, September 23, 2007

Do you have a monthly budget?

I want to continue in the vein of my last post about accumulating wealth. At the beginning when I started this blog I told you that my aim was not just to teach you different methods of making money, but more importantly to teach you the principles of making money, and to get you to think about how to make money and how to be successful, and to make your moves thoughtfully. While I do expose different money-making ideas, I don't want you to lose sight of the principles and the thought that you need to put behind these methods for them to be successful for you.

In my last post I talked about the very basic principle of spending less than you make. This is a basic, simple principle, but it makes all the difference. So today I have a question for you... do you make a monthly budget? Do you have a written out plan of how your earnings are going to be spent, or do you wait to spend the money as you make it? Do you have a sense of what your monetary priorities are, of what you must do and what can wait?

Saving money is not something that everyone does. Very few people understand the importance of saving money and spending what you have wisely as well. I believe that one of our greatest enemies today is the credit card. It allows us to spend money anytime and anywhere, and millions of people fall into the trap. Here is the problem, when you use a credit card, you are spending money that you don't have. I will talk more about this later, so save that thought for now and process it.

Saving money is essential because we never know what will happen to the economy.

Whether you run a business of any kind, or are employed in some firm, drawing monthly budgets is safest way to protect ourself and ensure that you're not spending more than you make.

A good way to go about this, an algorithm if you wish, would be as follows: First, you need to determine if there are any outstanding bills to be paid. This includes the rent/mortgage, electricity, gas, and bank loans if there are any. Having taken care of this, check what is left. The second thing is to put something aside for your absolute necessities, food and other essential groceries. Most people live pretty routine lives, so you know how much you need for groceries each month. And if you don't, you can figure it out by keeping good records and receipts of your grocery shopping trips, removing all the non-essential luxury purchases, and then totalling how much you need for your necessary groceries each month.

From what is left you should put aside a good amount in savings, and choosing recurring deposits with banks is a great idea. You can indicate the amount so that the process is automated.

You can then use what is left over to treat yourself, to go luxury shopping, or entertain yourself. If the money is not much, you can choose entertainment that won’t cost you much. But you will do this securely knowing that you are saving for your future, that you're building your wealth, that you have something put away for a rainy day.

While it may not seem much at the beginning, you will find that if you are disciplines, your savings will start to grow and accumulate, and as you see this happen you will be more and more motivated to save more and to start investing and securing your future more.

Do you have a monthly budget?

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