Money Essentials

Setting realistic financial budgets

Most people avoid creating a financial budget and fewer still stick to one. But it doesn't have to be painful.


If you're the type of person who always has plenty of cash, knows exactly where every penny goes and never has trouble paying bills, skip this chapter. You're either too rich or too smart to need it.

For the rest of us, unfortunately, making - and sticking to - a budget is the essential tool for ensuring that our money gets used the way we need it to. Even if you're in the happy situation of having plenty of income, the homework involved in drawing up a budget can be instructive, since you may find that you are spending more than you wish on items like DVDs, electronic gadgetry or restaurant meals.

Drawing up a budget is usually pure drudgery enlivened only by the reality of staring your foolish spending habits in the face. Why do you have a luxury sound system if neither you nor your spouse listens to it? In fact, one of the chief impediments to budgeting is that most people would rather not know how they really use their money.

It's bad enough to learn this kind of information on your own. It's even worse when a spouse or significant other finds out, since it usually confirms his or her worst fears - and provides new ammunition for future "discussions."

Take heart. Any spending mistakes you're making are probably common and not impossible to kick. Moreover, the bulk of budgeting's pains are at the beginning.

After you have a budget in place - and you've fine-tuned it with a couple of months of actual spending - tracking your expenditures becomes almost automatic.

If your boss at work were to ask you for an analysis of the department's spending, you'd figure it out quickly enough. Budgeting your household should be approached in the same businesslike fashion. A variety of electronic tools can make the process easier.

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Updated 7/10/2012 with content changes, links, typos fixed - aross