Open your eyes and face the pain – Before making a budget you have to know the numbers

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The easiest way to get a handle on your personal finances is to just write everything down in one place.  Some people prefer to remain in the dark about their finances, hoping it’ll all just go away, or they’ll hit the lottery.  You on the other hand, will be responsible and open your eyes to the pain of your financial reality. 

There can be nothing worse financially, then not knowing the details of your own finances.  If you are constantly surprised by getting bills for things you forgot you bought, having money unexpectedly come out of your checking account, and worse of all, missing payments.  If a chunk of your money gets taken every month because of late payment fees or over the credit limit fees you need to organize yourself.  No matter how difficult it may be, or how embarrassing it is to actually look at what you have done to your personal finances, it simply must be done. Get a handle on your personal finance by following some easy steps.  So grab a cup of coffee and a box of tissues and sit down in front of your computer.  It’s time to be honest with yourself.

First off go to every website that has to do with your money, your banks, credit cards, loans, everything.  Grab every credit card bill and statement you can find then open up an excel spreadsheet, or notepad, or even a piece of paper and record the details.

  1. For each account write down how much you owe, how much the minimum payment is and what day it’s due on, also record the percentage rate of the account.
  2. Next, open up a calendar and record how much you have to pay on each day of the month, this will also tell you what your checking account balance has to be on any particular day.
  3. Now record your income, and on what day you get your money deposited to your account on the calendar. 
  4. Once you have all this information recorded you can tell at a glance what you need to pay on any particular day of the month.  You can also see if you’ll be short or overextended during certain periods.
  5. Every month create a new calendar and record any changes that have occurred.  Also, make sure you record any birthdays or other special events where you will be forced to spend money on presents.

I guarantee you this is a difficult process, when I sat down and actually looked at the numbers not only was I genuinely surprised, but I finally understood why I was always broke during the middle of the month and rolling in cash at the end of the month.  This not knowing caused me to live like a hobo, then spend like Rockefeller.  A financial roller coaster of stupidity!    

Now, wipe away the tears…

You are now ready to make a budget.  My next installment will cover how to make a REALISTIC budget for yourself. 

Make sure you read my posts at http://www.thecheapbastid.com on the psychological and environmental obstacles to saving.  We all start out with the best of intentions, but, Just as people vow to quit smoking or drinking or to lose weight,  we are constantly bombarded with advertising, and the easy, culturally accepted availability of cigarettes or drink.  Changing your behavior to go from spender to saver isn’t an overnight process and the road is full of obstacles and idiots, protect yourself and be prepared for the people who will stand in your way of financial freedom.

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