Always remember to pay yourself first!

When setting up a monthly budget, most people go about it the wrong way. They figure out how much they are going to need for bills, for daily expenses, and other such things. Then whatever is left over, is supposed to go into savings. Sounds reasonable right?

Let me explain why this is the wrong way to go about making up a budget:

There are always things that will come up. A dollar here, a dollar there.. pretty soon, the money that was supposed to go into savings, has gone right out the window.
(sound about right?)

Using this method of budgeting and saving, you will find yourself digging your financial hole deeper and deeper.

The best way to to ensure you stick to your budget is to always make sure you "pay your self first". Set aside a monthly amount for your savings and put that away first. You should always have a small nest egg that you can get to quickly for small emergencies.

Seeing a new dress or golf club on sale is not an emergency.. A car breaking down is an emergency.

A good amount to consider for your nest egg is $1000. That number can vary, but make it enough to get you through.

After your emergency nest egg has been established, start looking toward some long term investments. Earning 3% in a savings account is not where you want to build your future. Mutual funds, or Long Term CDs are a good place to start.

The point is, aside from making more money for your future, you don't want that money sitting in your bank account where you will be likely to spend it.

Now we'll get back on track...

After you set aside your savings allotment, next come the bills. At all costs, try to stay current on your bills. Speaking from experience, it is much harder to catch-up than to stay caught up.

What ever is left, is your allowance. Sounds kind of childish putting yourself on an allowance, but we've already determined that you don't handle money well, or you wouldn't be in this bind.

The key to all of this is discipline. If you don't have the money (in your allowance), don't go out to eat, or out shopping.

Brown bagging it for a little while is not nearly as embarassing as having your phone shut off or a car reposessed.







Articles published with permission from 123debt.com.