One of the easiest ways to control and manage your money is to create and live on a budget.

Unfortunately, creating and living on a budget is not always as simple as it sounds. For some reason, a budget has become known as the dreaded “B” word – and is something many people try hard to avoid putting down on paper and sticking to it. Perhaps it is the feeling of being constrained, or the feeling that you “earned” your money, so you can spend it however you want. But for a lot of people, using a budget is akin to self-deprivation.

It’s not that difficult in reality, though. In fact, creating and sticking to a budget can be pretty easy if you follow a few simple rules.

Figure out where your money is going.

If you haven’t been following a budget, you may not even know where your money is going.

Tracking a month or two’s worth of expenses from your receipts, bank accounts, and credit cards will allow you to see where your money is actually going. Are you spending a lot in just a few areas? Or is money leaving your account in small amounts- like a leaky faucet, drip, drip drip?

Examine your spending categories for areas you spend too much-and then reduce them.

Even if you cannot cut back on things like utilities, rent or mortgage, etc., you may be surprised that a lot of your spent money is hard to account for. You may be taking regular withdrawals from the ATM in cash, and might be spending it on a lot of different things. You don’t have to cut everything to the bone- in fact, if you trim your budget too much, you will find it hard to stick with your goal of managing your money wisely. So start slowly, but start somewhere.

Set a budget for each spending category, and stick to it.

After you set up your budget, it is important to stick to it. Make yourself (and your spouse or family, if you have one) a promise to try and stick to the budget you have set up.

Allow yourself from freedom.

Whether you call it an allowance, or fun money, you will have much better success with your budget if you have some freedom to spend money however you want. Putting a category in your budget for fun money, or “blow money”, as personal finance guru Dave Ramsey likes to call it, will allow you to spend money on things you want without “blowing” your overall budget, and without making you feel constrained.

Review your performance and revisit your budget on a regular basis.

Reviewing your performance is very important to sticking with your budget. If you don’t know how you are performing, you will lose interest pretty quickly- and will not not be following a budget fairly soon. After you are sticking with your 1st shot at budgeting, you can try to reduce your spending even more by trying to trim from some other areas.

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Several years ago, I would NEVER pay my bills before the due date. Well, not much more than a day or two, if that much ahead of time. I always felt that paying bills early was like giving them use of my money ahead of time, and I certainly didn’t want to do that-I was smarter than that-and smarter than them, too!

One thing I could not get through my thick skull until recently was part of my problem was that for me, it was too easy to spend money in my checking account if it was there. If I had a bill that was due 10 days after I got paid, and I had money in my account, between the time I got paid and 10 days later, I never thought  about that upcoming bill or bills.

In other words, if there was money in my checking account, it was “available” and it was very easy for me to spend it on other things, instead of the bills it was meant for.
I never got myself into too much trouble, but I did get a little behind on some of them and had to scramble to pay them when they were due.

As smart as many of us think we are (and I don’t claim to be that smart), it’s very easy to spend money if it is just sitting in your checking account. I finally realized that by paying my bills as soon as I got them, instead of on the due date, worked a lot better for me than waiting till the last minute.

It allowed me to stop worrying about bills, and I could spend what was left over, without wondering if I could afford it.

I don’t always pay them that early these days, but I am always looking ahead to what is coming up over the next few weeks so I know what needs to be paid out of each paycheck.

Creating a budget can help you manage your cash flow; and as long as you are paying yourself first as well(putting money into savings) it can also can help you avoid :

• Living paycheck to paycheck
• Paying late fees
• Paying disconnect/reconnect fees for utilities or other services or installment payments
• Getting hit with default interest rates on credit cards

It seems rather simple, but a lot of personal finance does, and a lot of people, but of course not everyone,  still have trouble with it. I am not sure why that is, but I have a feeling it has to do with habits we have learned.

Do you pay your bills as soon as you get them, or try to get as close as possible to the due date to hold on to your money a little longer? Do you have a reason?

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For some, the dreaded “B” word, or “Budget” is akin to taking a trip to the dentist. We know we should go, but we really like to procrastinate in making appointments because it can be unpleasant!

Most people know a budget is a good idea, but don’t really like making one and have trouble sticking to them. I am not sure if we feel we are restricted or lack freedom with a budget, but many people even call them alternative names like “spending plan” to keep from saying “I am on a budget” to themselves or others.

I myself have never liked budgets either, and until recently never really put one together that I followed for very long. In fact, I still have problems with sticking to it and checking it as often as I should, but I am getting better.

Why are budgets important?

A household budget (or personal budget, if you are single) allows you to know where you are with your personal finances, and tells you if you can get where you want to go with your financial goals.

If you are in debt and want to eliminate it, or want to save more for retirement and retire early, unless you are extremely thrifty with your spending, you need to know what your are spending your money on, and how much, in order to put more money towards debt reduction or retirement savings.

Run your household like a business

Companies or businesses can’t exist very long without a budget- Almost all businesses of any size create a business budget to track expenses vs. income throughout the year. They must get deep into the numbers, and be able to show that they are operating within their means to get bank loans or lines of credit to make payroll. Why should your household be any different?

How to set up a personal or household budget

You need to figure out where your money is coming from, and more important and difficult, where it is going.

List all income sources-
If you only have a paycheck from a regular job, for you and/or your spouse, this in your total income. If you have other sources like a part-time job or hobby that makes some money, list those as well. If you want to budget with your after tax income, or your take home pay (after insurance deductibles and 401k or retirement contributions), that is OK, or you can include those in your budget if you want. Since that money is not available to me, I use my take home pay, but I think either way is probably fine.

List all expenses-
You should be able to rattle off your fixed expenses, like mortgage or rent, car payments, etc., but you may want to average other bills, like electricity or gas, as some of them fluctuate based on the season. You also need to figure out how much you spend on groceries, eating out, and other miscellaneous spending categories. Basically, you need to see where all of your money is going. I find looking at several months to a year of bank statements and credit card bills should suffice.

List all of the categories you have, and get a pretty good number on your total monthly expenses. You need to categorize “unaccounted for” transactions as well, such as ATM withdrawals. If you take out a lot of cash from ATMs regularly, you need to set a limit for that on a regular basis, such as weekly, monthly, or when you get paid, especially if this accounts for a large number in your expenses or expenditures column and you are not sure where it really goes.

If your expenses exceed your income, you obviously need to reduce expenses to below your income.

Once you see where your money is coming from and where it is going, it is up to you to decide where you are spending too much, and try to cut back in those areas-or reduce your budget- in order to free up money for the things you want to use it for, such as debt reduction, etc.

When you look at the numbers, don’t be surprised if you are surprised by where your money actually goes-If you haven’t been sticking to a budget, it is very easy to spend more than you think you are, especially on casual spending. Now that you have examined your expenses and set up a budget, stick to it, and you will find it a lot easier to reach your goals.

Free printable budget worksheets

There are a variety of ways to set up your budget, from pen and paper to online money management and budget tools. I have used excel (or open office, actually) for a while for a budget tool, and kept it pretty simple.

If you don’t know where to begin, several personal finance bloggers have created free printable budget worksheets that are a good place to start if you are looking for a template or guide to help get you started in making a budget-

Gather Little by Little- Personal Budget Worksheet

Mrs Micah- 3 New Years Worksheets

Get Rich Slowly-Budget Workbook

Another on I have come across is the Pear Budget Worksheet

Remember, a budget only works if you stick to it! It doesn’t have to be rigid though- tweak your budget, change your spending priorities, or do whatever you need to do as long as you are spending less than you earn and saving the way you want to.

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It’s really hard to predict the future. What I mean is, I am quite sure that between myself, my wife, and my children, I (we) will be spending money next year on something (or a bunch of things, more likely) that I am not planning for right now. Hopefully, it won’t be anything drastic or a real emergency, but for most people, I would guess, unexpected expenses have a way of creeping up, often at inopportune times. Murphy’s Law, I guess.

Over the last few days, I have been thinking of the money I spent in 2008, especially expenses I didn’t really plan for. While I have an emergency fund, the way I look at it is, that if I can save money for expenses that are likely to happen or I know about ahead of time, I will be better off in 2009 financially than if I don’t try to plan ahead.

Now of course, you can’t plan for everything; but I think a little foresight will help with keeping my budget and personal finances on the right track. Here are a couple of ways I am planning on preparing for these types of expenses in the coming year:

Add dedicated savings for unexpected spending categories

School/Recreation Activities for Kids- (not talking about tuition for school, summer camp, or daycare-, but miscellaneous fees, registrations, fund raisers, field trips, etc. Even if it is only $10 to $20 a month, it adds up.

Vehicle Maintenance/New Car Fund- Do you drive a car more than a couple of years old? Chances are, you will have to have your car serviced sometime in the coming year, not to mention routine car maintenance for cars of any age, such as oil changes, or new tires. If your car is older, have you started saving for a replacement yet?

Christmas and birthday gifts- Even if you have a dedicated Christmas savings account, do you save up for birthday gifts for your kids, their friends, or relatives? What about the cost of birthday parties for your children? I would like to save money for birthday gifts this year on a regular basis.

Vacations/Travel-Did you take any spur of the moment trips in 2008 that you didn’t plan or save money for? Do you know if you will be doing any traveling in 2009? While my wife and I don’t have anything planned just yet, it is likely we will take 1 or 2 trips during the year, and I want to have that money saved ahead of time.

Look over subscription based services, and other recurring expenses

Did you upgrade or need to add any service, subscription-based, or other recurring expenses in 2008? Do you think that might happen again in 2009? Some things you might want to look over include:

• Phone
• Cable
• Gym Membership
• Taxes
• Health Insurance
• Car Insurance
• Life Insurance
• Transportation costs-gasoline, etc.
• School or daycare expenses

And of course, there are many more. Can you cut back on any of them? Do you need to increase any of your coverages, such as life insurance?

While it is hard to predict what may happen to me in 2009, by looking back at 2008 I can see the types of “unexpected expenses” I might have in 2009, and I can look over my personal financial situation to see if there are any areas I may need to upgrade, like life insurance, for example.

Did you have any unexpected expenses in 2008 that makes you want to save money for something similar in 2009? Do you have any planned expenses in 2009 that you know about already?

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One thing I’ve found extremely helpful while trying to improve my financial situation is to take a daily look at a certain aspect of my finances, whether it be looking at my spending, checking my bank account balances, reviewing my budget, examining bills for correctness, or looking for more ways to save money.
The repetition of examining your finances on a daily basis can really help you improve your situation, especially if you are having problems. Even if you have simplified your finances with automatic payments or withdrawals, or are in pretty good financial standing, you can make things better and probably hold on to more of your money by examining your financial situation and thinking about it on a regular basis, even as little as 15 minutes a day. Some ways you can stay on top of things and improve include:

• Check your spending vs. your budget- Keeping tabs on your actual spending vs. what you have budgeted can prevent overspending in certain categories, and by checking regularly it will give you a “heads up” if you are getting off course.

• Thinking about what you spent that day- Keeping track of your daily expenditures can clue you in not only on how much you are spending but on what as well. Many people find it helpful to write all of their spending down for a period of time, to find out where all of their money goes, and to help find out good places to cut back.

• Monitor bills and check for accuracy- While most of the time, bills are probably correct, mistakes do happen. Especially if you have automatic payments set up, and some of your bills are variable, a quick, careful check can help you discover if you are paying too much, or if any mistakes have been made.

• Look for unnecessary expenses that can be cut- By looking at aspects of your finances regularly, you will probably quickly notice things that you no longer use, such as certain services, etc. When you discover something you can live without or are paying for more than you really need, such as premium cable, or an unlimited phone plan, downgrade to save money or eliminate the expense completely.

• Look for better deals- If you are planning on making sizable purchases in the near future, or you have your eye on something, checking ads and online deal websites regularly can help you get the best price on an item you are looking for.

• Planning future spending- Planning things you will need in the future is a great way to get a jump on saving up for them. Right now is a really good time to plan and even start your Christmas shopping, for example. Planning on a new car in a year or two? Start saving for large purchases like this now.

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Whether you are a new, incoming freshman, or a returning college student, you are probably gearing up for the new semester. Learning smart money management and how to reduce your expenditures now can help you establish a solid foundation for your future. Here are 25 tips on saving money, budgeting, and money management for college students.

Live like a college student

-You are a college student, so live like one. Don’t try to live the lifestyle of a graduate with a job yet.

Remind yourself why you are there

-You are there for an education first and foremost. Don’t blow the opportunity by neglecting your studies, over socializing, or getting into financial trouble.

Set a budget for your spending categories, besides tuition and books

-Food, Rent, Entertainment, etc.

Buy used books

-You will probably find much better prices at amazon.com than at the college book store, even on used books. Avoid buying new ones if possible.

Hit the happy hour

- Look for places with 2 for 1 drinks or free appetizers when you do go out on the town.

Socialize at dorm/apartments

-You don’t always have to go out, invite friends over to your dorm or apartment regularly to save money.

Use a local bank and debit card

-If there is not a nearby branch of your bank, open up one that has a branch on or near campus to make things more convenient.

High interest savings

-If you have a little money stashed away, open up a high interest savings account.

Budget you spending money for entire semester

-At the beginning of the semester, figure out what you have available for spending money each week, and stick to it.

Consider a part-time job

- As long as it doesn’t interfere with your studies, of course. An added bonus, if you have earned income, is that you can start a Roth IRA.

Learn to cook

-If you don’t know how to cook, start learning. It can be healthier and even cheaper than fast food.

Used furniture

-Check out the classifieds or garage sales for used furniture to furnish your apartment.

Shop at Goodwill

-Check out the local thrift stores for clothes and other household furnishings.

Manage your student loans carefully

- Don’t over borrow, and if you end up borrowing more money than you need, save it in a high interest savings account.

Don’t try to keep up with the big spenders

-While some of your friends may be living off of Mom or Dad’s credit cards, that doesn’t mean you have to keep up with their lifestyle.

Don’t sign up for the credit card t-shirt offers

-It may be a free ipod they’re giving away these days, but don’t sign up for credit cards just for the freebies. It may end up costing you a lot more in the long run.

Take advantage of free or cheap activities

-Many college campuses have a lot of student activities, most of which are free or very cheap.

Avoid ATM fees

-make sure you plan ahead for expenses, and have enough cash for purchases. Or use your debit card.

Get on a campus meal plan

-If one is available, a meal plan on campus can be very inexpensive per meal.

Don’t use or bring a car to school

- If you are away from home for college, and live on or near campus, you probably don’t need a car. This will also keep your friends from using you as a taxi service.

Bicycle

-Get a bike, and ride it to and from class.

Apply for scholarships and grants

-Even after you start school, keep applying for scholarships, grants, etc.

Live close to campus

-The closer you live to campus, the less you will need to drive. Many college campuses have plenty of nearby places within walking distance for shopping, socializing, etc.

Get roommates

-Sharing your living expenses with others can reduce them significantly.

Take advantage of student discounts

- There are lots of places that will give you a discount with your student I.D. Look for and frequent places that cater to college students and offer discounts or freebies.

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One thing that has plagued me over the years is paying for irregular expenses. Whether it be car maintenance items, kid’s summer camp fees, semi-annual or irregular insurance payments, or a multitude of other irregularly scheduled expenses, I have always had trouble remembering to think ahead for these types of expenses and put money aside for them. These expenses should be budgeted for, but when they occur infrequently, it is hard to keep the money separated in your checking account as untouchable. Another problem is that frequently,  I have dipped into my emergency fund to pay for these expenses when I should have budgeted for them. They were not emergencies. As an example, having to replace two tires because you hit a curb and blew them out would be considered an emergency fund item; replacing your tires because they were worn and needed replacing is not an emergency, in my book. Here is an easy way to start capturing these items within your budget by setting up a separate checking account.

Brainstorm and make a list all irregular expenses you can think of.

Over a period of several days, think about all of the irregular expenses in your life. Whether it is oil changes every 3 or 4 months, semi-annual car insurance payments, school registration fees, summer camp for your kids, annual donations you make to a charity, etc. By taking a few days to think of them all, you can capture most all of them. Alternatively, you can look through your bank transactions from last year to get an idea of your irregular payments.

Total them up and divide by the number of paychecks you receive.

Take all of your irregular expenses, total them up, and divide by the number of paychecks you receive every year. For simplicity’s sake, lets assume you are paid twice a month, and the total of your irregular expenses is $2400.
$2400/24 = $100 .

Transfer that amount to a separate checking account.

Open up a separate checking account, and transfer that amount per paycheck into the separate checking account. For me, I have chosen a Capital One Direct Banking High Yield Money Market Account (not an affiliate link).  I actually set this account up before I set up my irregular expenses budget, but it works great. They offer a 3.0% APY, no minimum balance, free ATM card and free checks, and you can transfer in and out from a primary checking account as well.  There are different transactional limits on this account compared to a normal checking account, you are limited to 6 withdrawals per month, but only 3 can be by check. So, depending on the frequency of your irregular expenses, it may not be for you and you may want a more traditional account. This works out fine for me as I don’t need to write more than 3 checks a month for my irregular expenses, and I can write checks for the bills directly from this account.

Use this account to pay irregular expenses.

Now that you have it set up, when your irregular expense comes along, pay for it out of this account.

Once you set up this account, it can start helping you pay for irregular expenses even if you don’t have the entire amount in the account. Suppose it is July, you have $1200 in your account, and you have to replace your tires. (Again this should be budgeted, not an emergency!) You spend $600, so you are only left with $600, and the next month (August) you have to pay $1000 dollars for school. Even though you are down $400, you are much better off than if you hadn’t budgeted for these expenses at all, as you still have $600 to put towards the payment, instead of trying to scrape up the entire $1000.

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 Setting up your bills for automatic payment can be great, you don’t have to worry about paying late, late fees, and you can even save yourself postage in some cases. But many people trying to organize and simplify their finances often have a big concern. You do give up some control, so to speak, of your money when you give someone permission to go ahead and take it out at a predetermined time. Many people still aren’t very comfortable with giving up that control, and may also be concerned with providing their financial information over the internet, even if many of the companies seem quite trustworthy, such as utilities, city services, etc. If I set up all my bills for automatic payment, and I am still trying to get my finances under control, will I cause myself more problems by over-drafting my account, or running low on money before I get paid again? Also, many of your bills could be due close to the same time of the month, and you may be worried about paying them all at the same time of the month and how that will effect your available bank balance.

One way to dip your toes in the water and become comfortable with automatic bill payments is to start small. You don’t have to set up all of your bills for auto-pay at once, and if you are still trying to get your finances into shape, you probably shouldn’t do so anyway.  To get started, start by picking your smallest recurring monthly bill, or two, and set them up for auto-pay. After a month or so with no hiccups, go ahead and add another one or two.  Before you know it, you will have the majority of your bills being paid automatically, with little to no stress on your part on whether you you will be able to handle or be comfortable with the payments automatically going through.

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