Three Types of Budgets

Whenever someone is working on a financial goal, one of the topics that comes up is working with or within a budget. The fact is that there are three distinct types of budgets, each with their own structure and approach. This subject is definitely not a “one size fits all” topic. Understanding the different types of budgets will help you track the right information for the task you are working on.

Operational Budget

Most of the time when someone is talking about their budget, they are referring to an operational budget. An operational budget is one that tracks ongoing financial activity. This the day-to-day budget of a business or a family.

An operational budget tracks both income and expenses. The purpose of this document is two-fold. First, by tracking all financial movement, or “cash flow”, a person can get a much clearer picture of the financial situation. Hopefully, this picture will allow a person to make any desired changes in an efficient manner. Second, the focus of this budget is on the difference between income and expenses. In a business, this is the profit; for a family, this is the “fun” money. What to do with this difference is another topic, for another time.

Project Budget

A project budget focuses on controlling expenses. The idea is there is a certain fixed amount of money available to pay for everything. By tracking expenses, a person can make sure that everything will be covered. When a person delivers a result “on budget”, this is the type of budget being discussed.

The key is to track expenses, enabling decisions to be made correctly. Questions about buying resources, hiring people, purchasing advertising are typically discussed in this context. Income is typically fixed at the beginning of the project or available in clearly defined amounts. Often, a project budget references an operational budget.

Goal Budget

A goal budget is where a target amount of money is set and the amount of income is tracked. If expenses are tracked, they are done so only as an impact on the income. For example, a fund-raising project is handled this way.

Any expenses tracked in this budget are simply expenses directly related to getting income. For example, a fund-raiser may purchase envelopes to distribute so that people can mail in donations. The primary focus is the rate of growth of the amount saved. Again, this effort can be related to other, more comprehensive activities, such as a family saving for a vacation as part of their overall budget.

Having the Right Structure

When a person is creating a budget, having the right focus is a critical element of success. Understanding the different kinds of budgets can really help setting the emphasis correctly.

Household Budget Basics

If you have recently graduated from high school or college and are entering the workforce, establishing credit and developing a sensible household budget is the foundation to your future success. Creating and sticking to a budget based on your current income with a commitment to spend within your means is the first step to creating long-term financial success. The following suggestions will help you develop your budget.

• Monthly Income – Depending if you are a salaried employee, paid hourly, or receive tips and commission income you will need to determine your average monthly income. If you receive 1099, tip, or commission income, you should gather your most recent pay stubs and last year’s tax return to calculate what you typically earn on average each month after taxes. You should also consider: child support, alimony, disability, or cash income that you receive as part of your monthly income. Once you’ve added up all the sources of your typical monthly income you now know what your expenses can be.

• Monthly Expenses – Look at your checkbook and your most recent bank statements to determine what you are spending your money on each month. Start with your fixed expenses, such as: rent, utilities, automobile payment, insurance, student loans, and credit card debt. Then, write down what you have been spending towards: food, entertainment, and other varying expenses. Once you have determined your average monthly income and expenses, it is now time to see how you can reduce your spending.

• Lowering and Eliminating Monthly Expenses – If you have a significant amount of credit card debt, you may want to consider a consolidation loan or if you are already a homeowner, a home equity loan to reduce your monthly payments. This may also allow you to significantly reduce the amount of interest you are paying annually. Other ways to save include: eating at home more often to reduce the amount of money you spend on food each month, turning the temperature on your thermostat down a few degrees and using the air conditioner less in the summer, turning the lights and electronic devices off when you are not using them, writing a list of what you intend to buy before you go to a grocery store or department store, and use coupons and buy generic whenever possible. These are just a few ways reduce your impulse buying and lower your monthly expenses. After keeping track of your spending habits over a few months, you can then see what you are spending your money on and how to eliminate unnecessary expenses and impulsive purchases.

There are countless ways to lower your monthly expenses and save money. Implementing just a few of these cost-saving ideas will help you decrease your spending and save faster than you may have thought possible. Now that you have created a monthly budget, open a saving account and deposit $25 per week into the account. Use your savings to avoid future debt, only use it for special purchases, holiday spending, or unexpected expenses. If you are renting your first apartment and have never had to pay utilities or purchase your own groceries, sticking to your budget will require discipline and commitment. For long-term success and financial stability, it is in your best interest to live within your means and stay out of debt.

3 Budgeting Tips That Work – How To Budget Like A Pro

You can do a lot more with your finances if you learn how to properly budget and save. You could go from sitting at the house watching television during your paid time off of work to taking a nice vacation with the spouse. You can do much more with your life if you learn how to handle your money like a pro. I’m going to give you 3 tips that if done correctly and steadily will be very effective. Some of these tips may seem obvious; however, too many people fail to do them!

1. Learn To Budget – As painful as it may be this all comes down to the old fashion way of grabbing a pen and a piece of paper and doing some math. Figure out your average monthly income and write that number down. Then, subtract all your bills. After that, take 5% or 10% of the remainder and add it into your savings account. Finally, you have to reward yourself. So hopefully you have something like $300 left, so take $100 and use that for recreation and put the remaining $200 into your budgeting or reserve account. Be sure to realize that life and finances is subject to change. So make this a reoccurring thing. I create a new “Budget List” about once every 3 months.

2. Expect The Unexpected – Things happen. Whether we like it or not, that’s just reality. You have to have the willpower to set aside some amount of money each paycheck into your reserve account. You still should also set aside a certain portion and put it into your savings account but if you put all your budgeting money and saving money into one place you won’t be building as much interest as you should be once a tire goes flat or you need an oil change or whatever else. Budgeting and saving are closely related but they are not the same thing! You do not want to have to spend the money you have been saving. The purpose of the money you have been budgeting is meant to be spent when needed.

3. Become Debt-Free! – This tip is very rewarding and so underestimated! Pay down your debt! I understand that by making investments you can one day become rich. But is becoming debt free not an investment? It’s an investment in yourself and future! Once you become debt-free investing will be much easier as well. So don’t feel like it’s an awful idea to pay a little extra every month. Of course, residual bills are inescapable but temporary bills are not such as a credit card or car payment.

There’s a ton of other tips on things you could be doing to budget better. These three are just ones that I have found to be effective in my own personal life. If you do happen to follow these tips you will see the results! If you follow these tips for two days and then stop, you probably will not see results. It is your decision to budget like a pro, become debt-free, and to be expecting things to happen. It’s also your decision to make the most out of your income and achieve financial freedom.

How To Stretch Your Salary When You’re Stuck

Sometimes your salary isn’t paying quite enough to cover all you wish it could. Maybe you got promoted to an exempt position that looks good on your resume, but now that lucrative overtime bonus is gone. You could have been offered benefits that you truly need (medical insurance, for instance), and on paper it all looks good, but in your wallet there’s not enough cash.

This is where that “B” word – Budget – comes in to help.

All the experts start with an honest assessment of where your money is currently going. If you don’t know where your money is currently going, how can you control its flow? Write down all the ugly reality on paper so you can look it in the face and deal with it.

The problem isn’t automatically solved by a higher salary; it is solved by controlling the way you spend what you earn.

You can see this in the sad tale of many lottery winners whose huge chunks of money are gone in a few years or the way even high earners go bankrupt. This means that you have hope because you can control your cash flow by choosing to work with the real numbers instead of the dream numbers.

Look at the real numbers and come up with a real plan and follow it:

  • Do some research on money management. There is so much wisdom and free advice or seminars out there that your head will spin, but the reality is you have to make it work for your situation.
  • What are you willing to sacrifice to keep that steady salary or those benefits?
  • When you make the choice NOT to spend, remind yourself that you are saying “no” to this thing and “yes” to controlling your cash flow. You are the boss of your spending.
  • Pay the minimum on your bills if you have to, but add a little when you can. Somehow, that extra gives you a sense of power.
  • Allow yourself some “mad money” that you can spend on whatever you like, but when it’s gone, it’s gone until you get paid again.
  • Somehow, keep saving for emergencies. Even a little bit adds up!
  • Sell some stuff and put the money on the biggest bills.
  • Come up with ways to reward yourself that don’t cost money.

Keep a reminder of your plan, and your goals, in view. You aren’t “stuck” with that salary, you have chosen to stay in the position for a reason. Is your reason still valid? Can you ask for a review and a raise? Are you utilizing all the benefits you have? You may need to sit down and crunch numbers with others who are involved with your money decisions, but it will be worth the time and effort that takes to get everyone on the same team in this!

4 Mistakes Young People Make And An Easy Way Out

Defaulting On Loan

The fact that you are out of college with no job, tired and broke. You may have enough reasons to default on your loan. That explains why 26% of American have defaulted on their loan before the age 30. This research comes from Credit Karma and Qualtrics. But the fact that you have no job doesn’t mean you should just sit and whine. An easy way can be to call your card company and negotiate on your loan. Your company will be more willing to sort you out.

Failure To Build A Good Credit Score

The effect of a poor credit rating can’t be ignored. Your credit card history carries everything. Your credit card score will determine if you can not only buy a home, but maintain it. If you will get a car insurance. If you will even get a job in certain states. A good credit card history is the key to your financial life. It is what opens the doors of possibilities for you. But the moment you abuse it, it will have no mercy on your life. So, guard it.

Irresponsible Use Of Credit Card

Being young comes with happy moments such as shopping. You buy everything that fascinates you, even the things you rarely need. It’s like there is no tomorrow. Controlling the things you buy can have a positive impact on your ratings. That is why financial discretion and discipline are essential when one is an adult.

Failure To Understand How Credit Card Works

Most young people rush on taking credit cards without giving much thought to what they are doing. And this is the key to poor score and bad financial habits. Before taking a credit card, one needs to understand the following things. You need to know how interest rate works. Once you get a clue on the works, you can find out how you can negotiate a better deal. Understand the consequences of late payment or default. You never know if they will turn you up to a debt collection agency.

Now that you have figured out the mistakes to avoid, it’s time you learned…

How To Get Out Of Any Debts Quicker And Faster.

If you are in debts, this 4 strategies can help you improve your rating and improve your financial life.

Get A Debt Loan

This is paying a loan using another loan. This may sound scary to you, but here are the benefits of this loan. First, you get a low-interest rate on your credit card. Second, if you have many debts, you can pay them once in one single payment. And since you have a lower interest rate, you pay less. Third, you will be stress-free. Another added benefit is that your rating will improve. Once you are through, they will report a good credit history to your bank. And finally, they will stop those collection calls.

Check Credit Karma Tool And Articles

Sometimes the best thing that you can do is study. Financial education is never taught in college and school. And this website offers a lot more about getting your financial life in control. There are also some great credit repair programs to help teach better financial habits.

Try Shopping With Gift Cards

Majority of companies like Amazon offers you a chance to place your credit card details on their site. What you may not know is that you will end up buying things that you don’t need. That is why gift cards are essentials for two good reasons. First, you save a lot of money on an item than when you could have bought it with a credit card. Because for every item that you buy with gift cards, there is a discount. Second, Gift cards improve your budgeting.

Keep A Tight Budget

Knowing what to buy; the things to buy; when to shop with a coupon or discount: Is called “budgeting”. And most young people are not frugal with their spending. A good budget is essential for everyone. Lucky enough, you can get information about budgeting by browsing financial sites on Google.

Don’t let credit cards sabotage your financial life. You can end this today and right now. You do this by taking a stand and applying the above tips to keep your financial life in check. Don’t let bad credit card history ruin your life. You can manage it.

8 Apps and Sites That Will Put Cash in Your Pocket

Are you living paycheck to paycheck? If you’re like a lot of people, your cash barely lasts until the next payday. While a windfall would be nice, it’s not likely. With little effort you can tweak your spending habits and maybe have a few dollars left over at the end of the week. Save a little here and you can spend a little there.

There are many ways to cut spending, save money and make a little extra cash. While each method may bring in a seemingly insignificant amount of change, together they add up to big savings. At the end of the week, you’ve managed to hold onto a good amount of your hard-earned dough.

Here are 8 ways to turn a pinch of technology into some great money-making opportunities:

1. InvisibleHand is a browser add-on. When you shop online it lets you know if there’s something less expensive out there than the item you’re about to buy. It works with Google so that when you Google something, it automatically checks for the lowest prices of that item and alerts you. There prices are real-time, meaning they are the price as of now, not yesterday or this morning. When you’re not shopping, the add-on stays hidden, so there’s nothing in your way. This is a great way to save money!

2. PriceBlink works in the same way as InvisibleHand. It automatically searches over 4000 merchants while you shop to bring you the best deal available. It also has the added feature of alerting you to coupons for the items you’re shopping for now and allows you to keep wishlists for items you want later.

3. GiftCardGranny is a site that sells discounted gift cards. If there are stores you shop at frequently or you are going to make an expensive purchase, buy the gift card at a discount and use it to save money on your purchase. You can also sell gift cards here as well as check balances and search for current deals and flash sales.

4. Coupons.com has hundreds of coupons for all sorts of stuff. Before you buy, see if there’s a coupon for your item. To get multiple coupons, just check each one you want and print them all at once when you’re done.

5. GasBuddy saves you money on your travels. While you’re busy driving around on your shopping trip, GasBuddy will show you which gas stations in your area are offering the lowest prices on fuel. Locals and app users, like you, report to GasBuddy when they see great, low gas prices so the app can let you know.

6. FieldAgent – pays you to do small tasks at local stores such as taking a picture of a display, checking the price of an item or scanning a barcode. They’ll have a list of jobs and you just pick the ones you want to do.

7. ReceiptHog – earn points for uploading pictures of your receipts, from any store, to the app. Redeem the points for cash or donation to a charity.

8. CheckPoints – earn points by doing fun tasks like scanning barcodes of name brand products when you shop, downloading new apps, taking surveys and more. Redeem your points for Amazon or Walmart gift cards or donate them to charity.

And while you’re at it, here’s another way to earn some pocket money.

There are apps that will pay you to review new apps on your phone. Just download, answer some questions and give your feedback. You get paid for each review. When you’re done you can simply uninstall the app so it’s not taking up space or data.