Budget Time: How to Prepare for 2015

CR.com 2015 budget sunrise

Money management isn’t an easy task. After graduating college several years ago, I earned $2,100 a month, paid more than $6,000 a year in student loans and lived in a pricey Chicago neighborhood. How did I do it? Organization, frugality and an iron-clad budget. Unfortunately, this strategy isn’t the norm in our culture. More than two-thirds of Americans do not budget their money—not on paper, anyway. What follows is wasted funds, overdrawn accounts and credit damage. Don’t sell yourself down the same river of apathy. Review the FAQs below and take advantage of our free budgeting strategy. The results could change your future.

Why do I need a budget?

Would you travel into unknown territory without a map? Drifting through life without a financial plan isn’t far off. Recognizing your financial strengths and limitations is the first step in healthy and long-term planning. For example, how much do you spend on groceries each month? If you can’t answer that question, it’s time to reassess your lifestyle. Knowledge is essential.

Is it complicated?

It’s overwhelming to see your spending habits on paper. Avoiding the need to say, “I spend how much every month?” is understandable. Still, facing harsh truths is the best way to overcome their consequences. For example, suppose you spend too much on entertainment each month. Creating a budget will help you cut expenses and learn how to manage money elsewhere. For instance, if you enjoy going out with friends more than staying home, it might be worth it to reduce your cable package to spend money elsewhere.

Can a budget do more than outline my expenses?

Of course! A budget can change your life. Consider the following example:

Susan is a 59 year-old teacher who wants to retire early. Although her financial planner suggests six more years of work, Susan hopes to retire in four years. She needs to save another $40,000 before retiring, so Susan consults her budget and creates a plan. She aims to save $10,000 per year by cutting entertainment expenses and food costs, carpooling with coworkers and renting a room in her home to earn extra income.

A plan is impossible without understanding the defining financial factors. As Susan learned, drastic change is possible with tight budgeting.

Do you have an example of a good budget?

Absolutely. Click here to download a sample. Save the file and edit its contents to suit your needs. Keep a few things in mind as you customize your budget:

  • You’ll find a Monthly Net Income field at the top of the screen. Based on the information entered in the Income, Expenses and Savings columns, you’ll see a green or red box. A green box indicates a positive balance, i.e., money left over at the end of the month. If the box is red, it means you’re overspending.
  • The Tax Rate field is also located at the top of the screen. This field indicates your federal income tax rate. Click here to find yours and enter its value in the field. Based on your entry, the values in the Taxes column will update automatically.
  • The Income, Expenses, Savings columns have several common factors:
    • Each column has a color-coded header box that will change automatically as you enter new expenses into the white boxes below.
    • Each column and a percentage field associated with each expense. These fields will update automatically as new amounts are entered. For example, the sample budget allots $150 for monthly fuel costs, an expense that is approximately 2 percent of the gross budget.

2015 is an opportunity to start fresh. Pursue a positive future by creating a budget that works.

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