Budgeting
The backbone of any Personal Finance plan is making and sticking to a budget. Quite simply, it doesn't make sense to spend more than you make. But this scenario happens all the time, and too often it happens without people realizing that their expenses exceed their incomes. So, how does one go about making a budget?
Step One: Make a record of all expenses
I recommend some sort of personal finance software such as Quicken or Microsoft Money. It really does make this step much easier. It's not necessary to have the latest version. I'm still happy using Quicken 98 Deluxe. For at least one month, keep track of every cent that leaves your hands, whether it's cash, credit, check, or whatever. You do have to be diligent in recording every single transaction. If you stop by a pay phone and put in 35 cents, record that 35 cent transaction.
Divide your expenses up into categories. Again, software will be very helpful in doing this. For example, McDonald's or the Chinese spot can go under 'Food'. After doing this, look at where your money is going. I can almost guarantee that what you find will be pretty surprising. All of those spur-of-the-moment purchases do add up. For those who smoke cigarettes and are thinking of quitting, seeing the actual dollar amount per month spent on cigarettes can be a great motivator.