by Art West

Created on: December 29, 2010   Last Updated: May 22, 2011

The word budget intimidates many people.  It shouldn't because a budget is your friend, you will be surprised how much you can accomplish if you follow a budget. Remember, in personal finance your are in charge.  If you want to spend $500 per month on donuts, you can put that in your budget...it isn't very wise, but since you are in charge, you can do it. 

The key to a successful budget is to set it up and then follow it.  The easiest way to follow a budget is to be sure that you have something in it for your enjoyment, it doesn't have to be much, but there should be a little something for you. 

In today's world, it is very easy to save for retirement.  Most companies offer a 401k plan.  You should invest in that or have a direct deposit into an IRA.  If you can afford to invest 10% or more, that would be great, if not I suggest at least 5%.  So technically, the first expense in your budget is to pay yourself via a 401k or IRA deduction.

You should prioritize your expenses.  Your next expense should be food.  This does not mean that you should be eating steak every night.  Depending on your financial situation, you may have to eat baked beans and store brand toaster pastries.

Then you should cover shelter.  That means your house payment or rent plus the basic utilities.  Basic utilities does not include cable.  It is simply heat, water, sewage and electricity. 

The expense after shelter should be transportation.  You car payment, gas and put 1/12 into a savings account for insurance and license plates.

You now have food, shelter and transportation covered.  You can now give yourself a little enjoyment and add cable to your budget.

Next you should roll up your sleeves and begin tackling any debt you may have.  There are several different philosophies as to how to get out of debt.  Personally, I think Dave Ramsey's Debt Snowball is the best.  You pay your bills off smallest to largest.

You now have your necessary expenses covered and you can begin budgeting for fun.  You can save for a newer car, a vacation or go to movies or concerts.  It is up to you because you are in charge of your budget.

I realize that different people are at different places in regards to income and debt.  The key is to set up a budget and follow it.  If you are in debt, you will be able to get out of debt and then have a better chance to enjoy life by following a budget.

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