Step 5 (Develope your budget)

Guidelines and worksheets for developing a written budget are the focus of this lesson. The guidelines and tools are intended to help you actually "plan" future use of income so that you are in better control of day-to-day and longer-term finances.

When asked how much money was enough, the rich man replied, "Just a little bit more."

Most people feel no matter what their income, they need more money to meet their expenses. However, more money is not always the answer. The key lies in how you plan and then, actually spend your money.

The following practices may signal real money problems just "around the next bend." Do you:

• dip into savings to pay current bills?
• pay only the minimum amount due each month on charge accounts?
• delay payment of some bills you normally would have paid on time?
• borrow to pay for items you used to buy with cash?
• take out new loans to pay old ones or to get lower monthly payments?
• not know exactly where your money goes?
• have less than 3 months’ expenses in an emergency fund?

Even if you answered "Yes" to all of the above, don’t give up hope! You can learn ways to get more from your dollars, have greater satisfaction from your spending, and set aside money to pay bills when they are due. Of course, you must first come to grips with the fact that you have a certain amount of money available to you and you are going to live within those limits. Although this may seem an impossible task, most people really can do it.

The secret lies in knowing where you are now, where you want to go in the future, and making a plan to get there. It’s similar to charting your route to a new and unfamiliar vacation spot. You just have to figure out which roads take you to your final destination-in this case, your financial goals. Think of it as directing your dollars to reach your dreams.

A successful budget often requires difficult decisions and cooperation of all who spend the family money. Consider a few guiding principles:

• Gather the entire household together and review the financial goals you set in Step 1.
• What needs to happen to reach them? It is very important that everyone affected by the plan has some say in it.
• Together, decide what each person will do to help control the family spending. Review your Personal Plan and Commitment to Reduce Spending from Lesson 3. Agree within the family that everyone will take turns having their wants met but must also be willing to give up something as well. Encourage, support, and show appreciation for one another’s efforts.
• Provide every family member with a personal allowance if you can. The amount must be fair, but is not as important as the freedom to spend it without answering to anyone.
• Learn and practice sound decision-making and shopping skills to get the most for your money.
• Make it a habit to save something, no matter how small, from every paycheck.
• Learn to live within your income and keep your credit under control.

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Spending Patterns Six Steps to Your Balanced Budget YOU are a fixed expense: Pay Yourself First! Action Steps for Lesson 5 For More Information Sources and References