REQUIREMENTS TO HAVE AN EFFECTIVE BUDGET

There's no perfect form that fits everyone's needs and circumstances, but you do need to consider some basic elements if your budget is going to work. An effective budget needs to be:

Realistic: Forcing numbers to work out on paper isn't hard, but these numbers need to work in real life.Even if you need to watch every penny at this point,don't make the numbers so low that you have no hope of succeeding your financial goals. If, as you go along, you fnd ways of cutting costs further, you can always change an entry.Concise yet comprehensive: You don't want your budget to have so much detail that you spend your whole life keeping it updated, but you do want to include all the expenses that you can identify or predict.

You often can group several expenses into one category. Although you may need to track expenses more preciselyfrom day to day (you may even want to carry a notebook), you can consolidate some items in the budget.
(For example, coffee from the gourmet shop, candy from the office vending machine, and a quart of milk on the way home can all be part of the food budget.)
Flexible: Feel free to improve the format of the budget as you continue to work with it. Add more lines if necessary, or delete lines. Change your spending estimatesas needed, too. You may find that you guessed too low or you may discover ways to save money that enable youto lower an amount.
If your financial situation changes - you get married, get a new job, relocate, or have a new mouth to feed draw up a new budget.Open to all concerned, garnering everyone's cooperation and commitment.

If you want a new car or a nice vacation, just plan for it rather than get yourself in a financial bind through big-ticket, spur-ofthe-moment purchases. It is important to maintain cash reserves to cover six months’ expenses in case of a dramatic event, such as job loss. However, if you plan properly, stick to your plan, and protect yourself with the proper insurance,your “Unforeseen Expenses” category won’t run amok.

Who contribute to the household income need to be in on the planning stages, budget creation, and review process. They need to buy in to the project for it to work.Small children may not need to be included in the planning, but they should know that something is happening, because the budget will affect them, too. If they feel that they're part of the project, they may be more understanding when you can't buy things for them. In fact,small children may want to contribute by saving theirallowance, collecting newspapers or cans, or finding other ways to contribute to the family's success.

To establish your budget, you frst want to create a master of the budget worksheet with no numbers flled in. You may want to include a few blank lines in each category on the master, in case you need to add other items later.Then photocopy this master document to create budgetworksheets to work on.

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