Mind on my money: Black Personal Finance 101
Getting on Track
The old saying goes, "If you fail to plan, then you plan to fail." This adage applies to personal finances. While most consumers will never outright admit that they would like to struggle with their finances for their whole life, and nobody in their right mind would ever claim to enjoy receiving phone calls from bill collectors, the reality is that without a plan in place for their finances, these outcomes are inevitable.
The "B" Word For most consumers, the very fist step to getting on track starts with the creation of a budget, also known as a spending plan. Now if you are like most consumers, the first thing that comes to mind when you hear the word "budget" is, "Now I can no longer enjoy my money." In reality however, a good budget does the exact opposite. A good budget isn't one that looks good on paper, but isn't feasible for your lifestyle. Rather a successful spending plan helps you map out your financial priorities, provides a road to achieving those goals, and reveals potholes in your finances. A spending plan is successful because it minimizes the spending that doesn't matter and instead frees up some of that money to be spent on things that are important to you. In order to create a budget one needs to know two things: How much money is going out and; how much money is coming in. In order to create a successful spending plan, a consumer needs to establish financial goals. Rather a successful spending plan helps you map out your financial priorities, provides a road to achieving those goals, and reveals potholes in your finances. A spending plan is successful because it minimizes the spending that doesn't matter and instead frees up some of that money to be spent on things that are important to you. In order to create a budget one needs to know two things: How much money is going out and; how much money is coming in. In order to create a successful spending plan, a consumer needs to establish financial goals. It Starts With a Why In order for a budget to be successful, it must have a purpose. The best way to provide purpose to your budget is to set financial goals. To develop your "why" you will need to ask yourself, "What do I want to accomplish?" Maybe you want to purchase a home, a new car, or go on vacation. Maybe its college for the kids, or impending retirement. Whatever your dreams are for your money, write them down on a piece of paper. this makes them concrete. Now each time you are faced with a random, impulse purchase, you can refer to your "why". Your why becomes the benchmark that will keep you on track with your budget. The Disappearing Act The next step to actually creating a good budget is to determine where your money is going each month. Most consumers can account for about 80% to 90% of their spending. They then find that it is very difficult to account for the remaining 10% to 20%. While these expenditures are usually little purchases here and there, they tend to add up; before long, there are gaping holes in your finances. next: Managing Debt
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