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What
is a Budget
A budget is a “tool” you can
use to manage your money. It is especially important if you
are facing or have recently been involved in a
foreclosure
or
bankruptcy
. It is the only
practical way to get a grip on your spending. The budget
process requires that you take charge of your cash and
understand just where the money is going.
The budget is a spending
plan where you itemize your income and expenses for a time
period (usually a month). It will help you prioritize
spending and pay bills first and then yourself. If used
properly, it will help you reduce your debt and begin a
savings program.
Why do I need a
Budget
If you go to credit
counseling for any reason, they will require you to develop
a budget. Most Americans spend until the checkbook says
zero, then they struggle until next payday. Some even go the
next step and spend beyond their income by using expensive
payday loans or credit cards. This activity will have dire
consequences down the road. A budget, and adherence to it,
will break this cycle and once again give you some financial
freedom.
A good stringent budget can
also help develop good saving habits. You will be surprised
at how much you can put away for your children’s education
or your own retirement in just a few years.
Principals of
Budgeting
The budgeting process can be
divided into 3 sections.
·
Current situation - what is my current income and expense
pattern
- Where do I want to be
in say 1-3 years (timing depends on the severity of the
situation). Set Goals
·
Income and Expense
Tracking
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