Budgeting For Dummies

Description

Build a budget that puts you on solid financial footing Ask any financially successful person how they achieved their goals, and chances are they’ll tell you it all started with a budget. And that’s exactly where you should start. Budgeting For Dummies shows you how to create a plan that fits your lifestyle, manages everyday needs, and builds your savings. Author Athena Valentine, founder of the Money Smart Latina blog, offers step-by-step details for creating and following a budget without feeling like you’re depriving yourself and your family of all the things that make life worth living. This book shows you how to figure out where your money comes from and where it goes so you can live the life you want and work toward your financial goals. Find out how to establish an emergency fund, eliminate debt, improve your credit score, and stick to your budget through economic ups and downs. • Discover budgeting methods that work so you can live within your means • Create a budget for your unique situation to get a handle on your income and expenses • Deal with common budgeting challenges without taking on more debt • Increase your credit score and save toward a major purchase You don’t need to make six figures to achieve your financial goals. Valentine, who also writes for Slate.com, knows the struggle of trying to make ends meet and is enthusiastic about sharing her knowledge with anyone who wants to improve their financial literacy. If you’re not sure where to start when it comes to managing your money, you can depend on Valentine’s tried-and-true advice in Budgeting For Dummies to set you on the right path. Title Page Copyright Page Table of Contents Introduction About This Book Foolish Assumptions Icons Used in This Book Beyond the Book Where to Go from Here Part 1 All about Budgeting Chapter 1 Beginning with Budgeting Basics Knowing What a Budget Is and Why You Should Use One Understanding Why People Think Budgets Fail You forget to adjust it You don’t have an emergency fund Your budget exceeds your income Spending excesses exceed your income Living expenses exceed your income Taking Inventory of Your Finances: A Spending Analysis Make a list of your financial assets and liabilities Assets Liabilities Record-keeping systems Review your spending for the past three months Chapter 2 Breaking Down the Parts of a Budget Seeing Where Your Money Goes: Your Expenses Identifying fixed expenses Allowing for variable expense Needs and wants Value-based spending Knowing Where Your Money Comes From: Your Income Depending on a monthly income Identifying additional sources of income You Gotta Have Dreams: Financial Goals Saving for your future Paying down your debt Putting your financial goals in place Part 2 Finding a Budget That Works for You Chapter 3 Zero-Based Budgeting Setting Up Your Zero-Based Budget List all expenses and subtract them from your income Assign your total income to budget categories Having enough money to pay for your monthly expenses Accounting for periodic or unexpected expenses: a sinking fund Track your spending Making sure you track as you spend Evaluating your success at the end of the month Explore real-life examples Perusing the Pros of Using a Zero-Based Budget Lets you see where every single dollar goes Aligns your expenses with your income Dedicates space for goal setting Considering the Cons of Using a Zero-Based Budget It’s a lot of work It can be tough if your income is irregular It may make your variable spending stressful Asking Yourself Whether Zero-Based Budgeting Will Work If . . . You don’t have the same expenses every month You’re not organized Chapter 4 The 50/30/20 Budget Setting up the 50/30/20 Budget Determine your income Distinguish wants and needs Determine your 50 percent needs Evaluate your 30 percent wants Save 20 percent for retirement and future expenses Explore real-life examples Example one Example two Looking at the Pros of Using a 50/30/20 Budget It’s simple It creates financial responsibility from the get-go It works regardless of your income level You can include fun in your budget Your financial goals are a priority Checking out the Cons of Using a 50/30/20 Budget Your categories may not match the percentage assigned You may use your fun budget for junk you don’t need Finding guidance for savings is difficult Evaluating Whether a 50/30/20 Budget Will Work If . . . You have a variable income You’re new to adulting Chapter 5 The Envelope Budget Setting Up Your Envelope Budget Determine your expense categories Create the cash envelopes Spend from your cash envelopes Make an online purchase Analyze real-life examples Example one Example two Example three Perusing the Pros of Using an Envelope Budget It’s easy to maintain It helps with overspending It helps build frugality and resourcefulness Considering the Cons of Using an Envelope Budget You miss out on credit card perks You may find it too restrictive Cash can be stolen or misplaced Asking Yourself Whether the Envelope Budget Will Work If . . . You struggle with planning ahead You need to share cash with your partner Chapter 6 The Pay-Yourself-First Budget Setting Up the Pay-Yourself-First Budget Figure out your financial goals Calculate how much you need to save Determine how much you actually can save and still cover your expenses Explore real-life examples Understanding the Pros of Using a Pay-Yourself-First Budget Financial goals are easier to stick to It helps you prioritize saving It’s low stress Considering the Cons of Using a Pay-Yourself-First Budget Saving even a small percentage can strain your quality of life You may need more structure Evaluating Whether the Pay-Yourself-First Budget Will Work If . . . You get overwhelmed easily You’re organized You have a lot of debt Chapter 7 Tips for Creating a New Budget Determining Your Budget Categories Planning ahead for the month Reflecting on fixed and variable spending Compiling a list of budget categories Using the Right Tools Tracking your money with budgeting software Looking at budgeting apps Picking the right app for you Taking the DIY approach Taking advantage of your accounts’ resources Practicing Makes Perfect Revisit your budget Create a cash buffer Look for ways to make your system easier to follow Part 3 Taking Care of Your Priorities Chapter 8 Establishing an Emergency Fund Understanding Why You Need an Emergency Fund Finding the Right Place to Stash Your Cash Hitting up high-yield saving accounts Mulling money market accounts Reviewing a Roth IRA Recognizing the importance of a separate emergency fund account Building an Emergency Fund from Scratch Decide your target amount to save First option: $1,000 Second option: $10,000 Third option: Three to six months of living expenses Evaluating your circumstances Use financial windfalls Take advantage of credit card rewards Consider automatic transfers into your emergency fund Find ways to make extra money Try out the gig economy Sell stuff around your home Consider renting a room Look into other part-time employment Learn a new skill Chapter 9 Saving for Your Retirement Accessing Employer-Matched Retirement Partial matching Dollar-for-dollar matching Tiered matching Making Your Money Work for You Set a retirement savings goal Max out your retirement contributions Consider more than one retirement account Keep your cost of living low Use catch-up contributions if they’re needed Chapter 10 Eliminating Debt Looking at the Different Types of Debt Student loans Credit cards Home and auto loans Home loans Auto loans Miscellaneous debt Government agencies Court-ordered debt Overdue bills turned over to collection agencies Medical bills Personal loans Loans from friends or family Paying Off Your Debt Compiling a list of your debt Considering different payoff methods The snowball method The avalanche method The fireball method Applying additional strategies Make a debt payoff settlement Negotiate with creditors Ask about hardship programs Use balance transfers Make extra payments Use financial windfalls Avoiding Accumulating More Debt Look into refinancing options Save an emergency fund Say no to credit card offers Invest in the right insurance Part 4 Budgeting in Action Chapter 11 Budgeting in a Tough Economy Keeping Your Head through the Ups and Downs of Inflation Comparison shop to find the best deals Use online tools Apps to help you find deals Adjust spending categories and goals Don’t forget your emergency fund Look into additional income streams Active income Passive income Portfolio income Plan ahead as much as possible Consider living frugally Evaluating Your Job and Its Related Expenses Discuss your options for alternative work environments Analyze your compensation package Assess work-related costs Budgeting with Irregular Income Calculate bare bones expenses and income Stick with cash envelopes Use community resources Chapter 12 Budgeting during Different Life Stages Taking Responsibility for Your Money as a Student Understand your financial aid package Need-based financial aid Non-need-based financial aid Apply for internships Understanding the different types of internships Finding a paid internship Utilize your school’s work-study program Maximize student discounts Account for major and ongoing college expenses Sharing and Agreeing on Money Management as a Couple Get on the same page as your partner Discover your money personality Don’t be afraid to try out different budgeting methods Use joint accounts in a way that works for you Identify financial abuse and financial infidelity Planning for Child-Related Costs Factor in housing costs Buy used Create an ongoing sinking fund for school expenses Research daycare opportunities Look into a dependent care account through your employer Living off the Money You’ve Saved for Retirement Examine your saving ten years before retirement Understand your retirement budget Trim your expenses and take care of lingering debt Make sure you’re signed up for senior discounts Prioritize your needs over others’ Chapter 13 Budgeting for a Major Purchase or Life Event Purchasing a Home Use the 28/36 rule Determine your down payment Research your financing options Consider other homeownership costs The 1 percent rule The square foot rule The 10 percent rule Remodeling or Renovating Your Home Buying a Car Choosing between buying new and buying used Thinking through insurance Purchasing a car in cash versus financing What can I realistically afford? Will I be approved for financing? Does taking out a loan rather than paying cash have any benefits? Planning for recurring costs Paying for Life Events Throwing a wedding Pick three things that are important and skimp on the rest Think outside the box Keep the guest list small Research your venue Try to DIY as much as possible Starting a family Review your health insurance plan Navigating your parental leave Be prepared to budget for new expenses Part 5 Using Your Budget for Money Management Chapter 14 Budgeting for Major Life Changes Losing Your Job File for unemployment and other state benefits Eligibility requirements Apply for unemployment Additional state benefits you may qualify for Assess your overall financial situation Focus on essentials Communicate with financial providers if paying down debt Look into community resources Take care of your mental health Having a Chronic Illness or Short-Term Disability Assess your resources and income Look into ways to cut healthcare costs Make sure you have health insurance Take advantage of tax-free accounts Cut costs on prescriptions Ask in advance for package deals Anticipate the future Figuring Out Your Estate Planning Protect your assets Contact an estate attorney if necessary Use life insurance Review proper documentation Chapter 15 Keeping Tabs on Credit Card Spending Making a Plan to Use Your Credit Cards Wisely Determine how much you can spend Be smart about which budget categories you charge Pick a budgeting method for payoff Avoid carrying a balance Set card accounts for fraud protection Improving Your Credit Score Using Credit Cards to Your Advantage Utilize rewards like travel and cash back Use autopay for fixed expenses Chapter 16 Using a Budget to Plan for the Future Setting Financial Goals Identify reasons to set financial goals Organizes your finances Clarifies your values and priorities Improves your money mindset Provides measurable progress Builds confidence that extends to all areas of your life Establish time frames Goals for six month to three years Goals beyond three years Choose your savings accounts wisely Avoid early withdrawal from your savings accounts Investing on a Budget Use a fee-based certified financial planner Think small with apps and robo-advisors Saving for College Invest in a 529 plan Contribute to a Coverdell education savings account Squirreling Away Funds for Future Fun Budgeting for travel Cut out budget excess to put toward travel Set up an automatic savings account transfer Sign up for flight alerts Budgeting for a new hobby Try a kit first Visit your local library Shop at dollar stores Budgeting for social activities Check out happy hours Look for free things to do Use Groupon Part 6 The Part of Tens Chapter 17 Ten Creative Ways to Budget Make a No Spending Rule Avoid Buying New Clothing Buy Secondhand Items Shop Local Reset Your Daily Habits Allow for a 30-day Waiting Period Look into Sustainable Living Consider Minimalism Practice Gratitude Use Visualization When Goal Setting Chapter 18 Ten Ways to Stay Motivated When Following a Budget Define Your Why Document Your Journey Prepare to Deal with Burnout Tackle a 52-week Challenge Put Away a Dollar a Day Automatically Transfer $20 a Week Celebrate Paying Off Debt Visually Represent Progress toward Major Purchases Think about the outcome Write a Recap of Your Accomplishments Index EULA