by Barry Tadmore

Created on: April 10, 2008

An accurate personal budget is extremely important if you have financial goals in life. However, most people throw the word "budget" around as if they were actually living on a budget. Unfortunately, they usually aren't. Most people have never actually sat down and figured out their budget. My wife and I did so a couple of years ago, and we found a lot of great stuff. Things we were overspending on, things we weren't spending enough on, and how much money we were absolutely wasting.

The best thing you can do is track every expense you have for two or three months. Whether its the energy bill, your trip through the McDonald's drive-thru, or the candy bar you picked up at convenience store, you need to track every penny you spend. For my wife and I, I created a spreadsheet where we entered every single expense. She bought a pack of gum and I made her enter it into the spreadsheet.

The reason for the meticulous tracking was because I knew I would want to create a budget. And I wouldn't just say that I had a budget. I would make a budget that made sense, could be followed, and was realistic.

I took all three months expenses and averaged out what I was spending on my cell phone bill, the heat bill, gas for our cars, etc. I rounded that average up to the nearest $5 increment, and that was my budgeted expense for that type of expense.

I looked at my spending money and figured out what I spent each month. I averaged $150 per month of just random spending money. Eating out for lunch breaks at work, going to the movies, etc. When I created a budget, I cut that number to $120 per month ($30 per week). I knew I could cut back if I tried, and I've ended up saving even more. The way I figure it is the more I save on budgeted items, the more I can carry over to the next month. My goal is to take a vacation with my wife on only the funds that I've already budgeted for. I try to spend less on groceries, spending money, gas for the cars, etc throughout the month so I can put it into my "piggy bank" that I call "budget surplus."

By living on my specific budgeting, my wife and I are able to put $200 per month into savings. While it isn't a lot of money, we know that the further we get along in life, the bigger that savings number will be. And if we didn't have the budget, we wouldn't end up saving nearly as much.

The best part of a budget? Once you've figured out how much you'll spend on everything, you know how much you'll put into savings every month. My suggestion is that you pay yourself first. Put that amount into your savings account each month as if it were an actual expense. This will ensure that you don't overspend throughout the month. A personal budge has one main benefit: It helps you save money!

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