It seems like everyone is wiling to provide you with budgeting advice. Everyone from dear old dad to old Uncle Morty has something to say about how you spend your money. You may think you know where your money is coming from and where it is going, but if you do not have a written, monthly budget you cannot know for sure.
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I've always told people that the most important budget advice I ever received was the recommendation to do a budget in the first place. You should be surprised at the number of people with kids, mortgages and minivans who have never taken the time to work up a family budget. Both parents may be working 50 and 60 hour weeks, but at the end of the month they are struggling to make ends meet as if they were newlyweds just starting out.
If you don't keep careful track of where you money is going, you will never be able to stem the tide of red ink. It's that simple. Before you can get control of your finances, you need to know where the money is going. Everyone has months where more money goes out than comes in, but if you are running a deficit month after month, you need to get control of the spending. Unlike the government, you don't have a printing press in the basement where you can just crank out more cash whenever you need it. If you do have a printing press in your basement, we need to talk, but that's another story for another day.
Starting a budget can be a time consuming and painful process, but it is absolutely vital to your financial well being. Sit down and write out a detailed list of all your sources of income, including your salary and that of your spouse, any interest or dividends you earn on your investments and bank accounts, etc. Next write out a list of every recurring monthly bill — power, water, telephone, cellular, internet access, cable television, etc. Then go through your checkbook and list all the checks you wrote the last month and what they were for. If you charge a lot of items and then pay the bill at the end of the month, keep the credit card statement and write out each item on the bill, not just the total. It is vital to have a list of every expense you incur so you can see what can be trimmed.
We had heard about annuities and were investigating them for our IRAs. We also heard bad things about pushy brokers over the years. So when we went to the ImmediateAnnuities.com site we were skeptical about calling them. But whenever we called their staff was really friendly. They answered all our questions and one of their reps even told us that at our ages there was no advantage to buying the annuity with our IRAs. These guys are really honest!
Do this for at least a couple of months until you get a good idea of your spending patterns. You probably already have a good idea what your monthly living expenses are, but you may be surprised at how much is sneaking out the door on things that seem frivolous after some time has passed. For instance, did you really need to order pizza and Chinese takeout 10 times last month? Could you have cooked a few times and saved the cash? It is these type of things you need to track in order to work up a realistic budget.
Too few people take the time to work up a budget and stick to it. Once you have a budget program in place, it will be much easier to match your income to your outgo and to live within your means. Who knows, after a few months of fiscal discpline, you may even have some extra money to put toward your retirement or your child's college tuition.