Your budget should reflect the life you want tolive now and in the future, and it gives you bettercontrol of your financial destiny. At thesame time it can help you manage your debt, and betteryet, it can help you make sure the amount of debtyou assume is within a healthy range.
Where Do I Begin?
Hopefully you can soften up to the idea of creatinga budget for you and your family. If so, and you don'tknow where to start, here are a few pointers.Determine your total annual household income.Figure out your expenses. You don't need any complicatedcomputer software—a simple budget worksheet,which you can download from any number of sites onthe Internet, will more than suffice. Hopefully, onceyou subtract your spending from your income, you'llhave a positive figure. If not, you willdefinitely need to make cuts somewhere.Before you start thinking that a budget is ascary endeavor, think how much scarier andstressful it is to be hounded by creditors.
Do I Like What I See?
Now that you have everything down inblack and white, ask yourself: Do I like what I see? Ifwhat you see and feel is a throbbing reminder of howpoorly you've managed your debt, resolve to get a betterhandle on your spending. Make the necessarychanges to reflect the life you want to be leading. Ifyou decide you want to take an extended vacation thisyear to spend some quality time with your family,write it into your budget. Just remember that moniesspent on the vacation will need to be saved elsewhere.
Is It All Worth It?
Many people do not realize how much they spendon pricey coffees, biscotti, and other snacks andinsignificant purchases that are forgotten withindays. Such purchases can literally amount to thousandsof dollars each year. For a real wake-up call,keep tabs on all expenses for 2 weeks.
Then ask yourself, is it worth it? Is thereanything else I would rather be doing withthis money that better reflects my values, dreams,and goals? Hopefully you are more convinced thatbudgets aren't restrictive, limiting, or scary in theleast. On the contrary, they are simple tools that giveyou the freedom to live the life you want, placing youmore firmly in control of your destiny.
Katherine B. Paal, MBA, CFP®, CTFA, is a Certified FinancialPlanner™ practitioner at Heritage Financial Consultants inLutherville, Md, and is an investment advisor representative,registered representative, and licensed insurance broker withLincoln Financial Advisors, a registered investment advisor andbroker/dealer (1300 York Road, Lutherville, MD; 410-339-6675). She welcomesquestions or comments at kpaal@LNC.com. This information should not be construedas legal or tax advice. You may want to consult a tax advisor regarding thismaterial as it relates to your personal circumstances.