Budgeting your finances is an important part of making sure you don’t spend more than you earn. Founder of Nationwide Biweekly Administration Dan Lipsky has created a simple, easy to follow plan to help you get and stay on track. Following a monthly spending plan can be broken down into 4 easy steps: 1) Figure out what your short, medium and long-term goals are, 2) write down all your monthly recurring and discretionary expenses, 3) write down monthly income from all sources, and 4) subtract your monthly expenses from your income. Determine whether you are in the black or the red!
1) It is crucial for you to figure out what your goals are. Mr. Lipsky’s financial plan helps you see the difference between a short-term goal (i.e. new washing machine or a new couch), a medium-horizon goal (i.e. a trip to Europe or a down payment on a house) and a long-term goal (i.e. retirement). If you don’t know what your goals are, you won’t be able to reach them! You may find that without a budget you have frittered away your money on small meaningless purchases and haven’t been able to amass savings to help you reach your goals. It is during this process that you can set up separate bank accounts for each of your goals. You don’t want to mix your long-term savings account with your monthly expenditure account or you just might find that your long-term savings disappears into the minutiae of daily life!
2) Dan Lipsky’s plan to help you categorize each expense makes figuring out recurring expenses from discretionary spending easy. This will help you identify where cuts may be made, a critical step in effectively budgeting your finances. Recurring vs. discretionary expenditures may often overlap and Dan Lipsky can help you to see where cuts can be made. Looking at interest expenditures (and annual percentage rates on credit cards) can be especially enlightening during this step of the process. Dan Lipsky can help you examine what a difference a high interest rate can make in your monthly expenditures.
3) Another important step in the budgeting process is to see what income comes in monthly. This can be especially challenging for someone paid on commission or someone in a non-salaried position, such as an independent graphic artist. This budgeting process will help you see where you can average your income and divide it back out monthly.
4) This is a big one: subtract expenses from income. You may be continuously living on credit cards to finance your expenses and you will be able to identify this during this step. It is critical that you either cut expenses or increase income to make the numbers balance! Dan Lipsky can help you see what makes the most sense for your situation.
Going through this process to help budget your finances can be eye-opening. With Mr. Lipsky’s tips as well as plans such as the Interest Minimizer by Nationwide Biweekly Administra [http://www.nationwidebiweeklyadministrationblog.com/], you will see how important it is to live within your means and to cut unnecessary expenditures. It is only through careful budgeting that you will be able to achieve your goals.