Budgeting

Gather every financial statement you can. This includes bank statements, investment accounts, recent utility bills and any information regarding a source of income or expense. The key for this process is to create a monthly average so the more information you can dig up the better.

Record all of your sources of income. If you are self-employed or have any outside sources of income be sure to record these as well. If your income is in the form of a regular paycheck where taxes are automatically deducted then using the net income, or take home pay, amount is fine. Record this total income as a monthly amount.

Create a list of monthly expenses. Write down a list of all the expected expenses you plan on incurring over the course of a month. This includes a mortgage payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings and essentially everything you spend money on.

Break expenses into two categories: fixed and variable. Fixed expenses are those that stay relatively the same each month and are required parts of your way of living. They included expenses such as your mortgage or rent, car payments, cable and/or internet service, trash pickup, credit card payments and so on. These expenses for the most part are essential yet not likely to change in the budget.

Variable expenses are the type that will change from month to month and include items such as groceries, gasoline, entertainment, eating out and gifts to name a few. This category will be important when making adjustments.

Total your monthly income and monthly expenses. If your end result shows more income than expenses you are off to a good start. This means you can prioritize this excess to areas of your budget such as retirement savings or paying more on credit cards to eliminate that debt faster. If you are showing a higher expense column than income it means some changes will have to be made.

Make adjustments to expenses. If you have accurately identified and listed all of your expenses the ultimate goal would be to have your income and expense columns to be equal. This means all of your income is accounted for and budgeted for a specific expense.

If you are in a situation where expenses are higher than income you should look at your variable expenses to find areas to cut. Since these expenses are typically essential it should be easy to shave a few dollars in a few areas to bring you closer to your income.

Review your budget monthly. It is important to review your budget on a regular basis to make sure you are staying on track. After the first month take a minute to sit down and compare the actual expenses versus what you had created in the budget. This will show you where you did well and where you may need to improve.

Have a look at the following link for a fair idea about budgeting.
www.mybudgetplanner.com

Setting Goals

The first step in personal financial planning, and the topic of this article, is choosing and following a course toward long-term financial goals. As with anything else in life, without financial goals and specific plans for meeting them, we stray along and leave our future to chance. As it is said : "If you fail to plan, you plan to fail"
The second step in personal financial planning, "Building a Financial Safety Net," will be discussed in my next post

FOUR SIMPLE STEPS FOR SETTING FINANCIAL GOALS
Step 1: Identify and write down your financial goals, whether they are saving to educate your kids, buying a new car, saving for a down payment on a house, going on vacation, your daughter's marriage or planning for retirement.
Step 2: Break each financial goal down into several short-term (less than 1 year), medium-term (1 to 3 years) and long-term (5 years or more) goals.
Step 3: Educate yourself! Read moneybhaiadvisor, or a book about investing, or surf the Internet's investing web sites. The stock market is not voodoo. With a little effort you can learn enough to make educated decisions that will increase your net worth many times over. Then identify small, measurable steps you can take to achieve these goals, and put this action plan to work.
Step 4: Evaluate your progress. Review your progress monthly, quarterly, or at any other interval you feel comfortable with, but at least semi-annually, to determine if your program is working. If you're not making satisfactory progress on a particular goal, re-evaluate your approach and make changes as necessary.
DO IT NOW!
There are no hard and fast rules for implementing a financial plan. The important thing is to do SOMETHING, and to start NOW.
Read my next post on "Building a Financial Safety Net" to prevent financial disasters caused by catastrophic illnesses or other personal tragedies.

Every financial advisor will tell you that to succeed, you must set goals.
But that just doesn't tell you enough. You see, there is an art to setting goals that actually work.
It isn't enough to just say, "I will get out of debt." While that is a good idea, it isn't a goal until you do a little work on it.
First, set yourself a time limit on your goal. If you have no date to work towards, then you will just be wasting your sweet time. You have to set a date to do this. For example, you can plan to pay off Rs. 100,000 debt in the next five years. You automatically know that you will at least have to find Rs.2,0000 a year to go towards that debt, not counting the interest.
This step is trickier than it sounds. You have to be reasonable when you set your goal. If not, you will just quit. That is why most budgets fail. They aren't reasonable. Set a date that will actually work for you.
If you miss your deadline, simply readjust your goal. You've made progress on it, so all is not lost. Just set another deadline and work towards it. Remember, life doesn't always work according to our plans. That is why plans and goals change over time.
You have to not only decide to get out of debt, but you must define what that really means. Do you really know what it will take to get out of debt? You need to sit down and write down your goal. Write down the time limit you have given to achieve your goal. Now define that goal.
I find that the definition comes in the actions that must be taken to achieve the goal. These small steps make a goal easier to handle. It is hard to get out of debt. But it is much easier to call your credit card and request a lower interest rate.

Now take a pad of sticky notes and write your goal on several of them. Put them on the front door. Put them in your wallet. Put them in your checkbook. Put them on your computer. Put them on your bathroom mirror. But more than that, each time you think about doing something that threatens your goal, you have to think about what achieving your goal will really mean. You might really want a new car, but when you think about it, retiring early means much more.
When you focus on the benefits of reaching your goal, the sacrifice doesn't seem to be so important. It is easy to live a frugal life now if you know it means a completely debt free life in ten years and early retirement in style. It is easy to not eat out once a week if you know it will help you get to eat a meal in Paris in a few years.