Budgeting

The first part of putting any financial plan into action requires you to control your
flow of money. A budget tracks your income and expenses, and helps you direct

the flow in the way you want it to go.
To construct a budget, first account for
all your income. This includes your
paycheck, plus any income you might
have from other sources such as
rental income or government benefits,
interest on money you have in the
bank, or investment income.
From that, you'll need to subtract your
expenses. Expenses can be broken
down into two categories. Fixed expenses
are those you have to pay,
such as rent or a mortgage payment,
car payments and insurance, utilities,
groceries, and clothing. Discretionary
expenses are more optional items,
such as eating out, entertainment,
gifts, and vacations.

INCOME
1. Paycheck
2. Rental income
3. Government benefits
4. Interest
5. Investment income
▬ EXPENSES
1. Fixed expenses
2. Discretionary expenses
═ SURPLUS/DEFICIT

Now, subtract your average expenses
for a given period (a month or year)
from your income for the same period.
Is there a positive number left over?
That's good; you're "in the black" or
running a surplus. A surplus can be converted into savings or an investment for
the future.

But if you get a negative number, that's bad;
you're "in the red" or running a deficit. You're
spending more than you're making. The only
thing that's going to change that equation is
either increasing your income or decreasing
your expenses (and it's the discretionary
expenses--the "fun stuff"--that are easiest to
reduce)--or both.
So, let's look on the bright side: you're running
a surplus. One of the first things you want to do
with that surplus is create an emergency fund

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