Creating a Budget

This may sound simple, but often, budgets are 'ball-park' estimates done on the fly. For example, you have in your head a fairly good estimate on what you can and can't afford. This may work for you, but if you were to write down your actual expenses each month vs your income, you may find a few ways to save more each month by cutting out a few unnecessary expenses. 

The key to creating a budget is using factual figures. An estimate of expenses could end up being a shortage at the end of the month. If you're not 100% certain on some expenses (example: gasoline typically consumed each month), estimate at first, but keep track of it for the next 30 days and update you estimates as needed. The more detailed you are now, the better off you'll be in the future...

There are several great "budget planner" forms and/or programs available on the net, ranging from free to nearly free. Using a simple spreadsheet (example: excel) would work just fine and is something you could easily do yourself. Feel free to use our budget planner; simply print it out, fill it in and you're set. Once you created a budget, you have to stick with it, cut where you can, if you can and see if you can contribute a little extra towards your savings. Another option is a program by Quicken which covers just about everything you could ask for. Quicken Personal Finance Software allows you to manage all of your financial accounts in one location, track your investments, view your complete portfolio, and organize your finances. The software really provides a complete solution for managing your personal finances more efficiently, so having that program, or something like it, would be an excellent option.

It's important to plan for necessity, leisure or entertainment, as well as saving for both emergencies and for your future. The common rule for an emergency fund is 6-8 months salary. If you were lose your job during a tough patch in the economy, it could be quite a while before you find a new job. There's no better example of this then right now with the current high unemployment and job seekers looking for work for several months. If unemployment hasn't impacted you, consider yourself fortunate and use this as an eye opener to what it could be like if things were to get worse before getting better. Once you begin to budget for an emergency fund, you'll have to start planning for the future and your retirement. This could include a 401-k from work, an IRA (Traditional or Roth), and other investment accounts or even a combination of accounts. The longer you have to save, the better off you'll be in the future, and there really isn't any better time to start then now. The stock market took a hit with the real estate collapse, bank meltdown, etc, so buying in now could turn out to be beneficial. How much should you put towards retirement? The best answer is - as much as you can... There really isn't a right or wrong answer, but if you want to play it safe, save as much as you can! Consulting with a financial planner is always the best option, this way they can come up with the best possible plan for your particular circumstances.

Use this calculator to find out how much you need to save to meet your desired income during retirement:

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