CWR Building Wealth – Happy New Year
By Dwight Harshaw, BBA, Personal Finance Counselor
Happy New Year! What are your personal financial goals this year? Well if you have not made any, I want to recommend one. Create a budget and stick with it. Everyone should do it whether you’re in college or not and there is no better time to create one than at the beginning of the year.
A budget is a blueprint of how the money you earn will be spent and saved. Every dollar has a dedicated purpose. Dollars for retirement savings such as 401k plans or IRAs and constant expenses like mortgage, insurance, student loans for example are easy to budget for because they don’t vary, but money to be used for variable expenses such as restaurants, entertainment, and clothing can be challenging. Once again, every dollar has to have a purpose; you have to set aside the money you think you will need for everything on your budget list; you have to have enough discipline to stay on your plan and not exceed it. Hopefully you don’t have more going out than you earn, if you do, you’re in debt and I’ll write about how to overcome that in the future. If you are the typical college student you have a limited amount of revenue coming in and your budget items will consist of cell phone, food, tuition, rent and utilities but the process works the same, you make your plan and you work it. When you follow your budget you will have control over your finances which gives you a feeling of peace and sets you up for a more prosperous existence.
A budget serves two purposes. One is the planned use of your money, and two, a diary that shows how you actually used your money. So, another suggestion that works well is to record all of your expenditures no matter how big or small; donations, gifts, transactions; you record all of them to create your budget diary. You will have to request and save all of your receipts and keep notes of person to person transactions as well as any money that comes in and record them for that day. Why do this? Well on the consumption side in the beginning of the budgeting process you will slip-especially if you use a credit card-and buy things on impulse. When you shop at big stores that sell a lot of items, you may go there with the intention of buying one item and leave with a basket full. A budget diary helps you to see where your money has gone, it pinpoints areas that need adjustment, and it illuminates the leaks in your spending that need to be plugged. It seems like a lot of work but it isn’t and it really pays off.
I can’t say enough about budgeting. It is an important part of any financial plan no matter what your level of wealth is. If you have never used one, you should do it now. You can create your own budget form on paper or make a spreadsheet or do a search for free budget forms on the internet. Whatever you do get started and stick with it.
About Dwight Harshaw: Dwight Harshaw is a personal finance counselor and writer. He is also a Realtor with Access Realty, Inc. in Little Rock, Arkansas. He has a BBA from the University of Arkansas at Little Rock in Finance with emphasis on financial planning.