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HOW TO SET UP
A SUCCESSFUL BUDGET
Setting up a budget that will work for you is the first step in Financial Planning. Here's how to do it right.
Difficulty Level: Average
Time Required: 1 to 3 hours
Here's How:
- Start with a canned budget worksheet (click here to download).
- Go through your check book or bills for the last two to three months and add and delete categories from the worksheet to fit your expenditures.
- Think about your hobbies and your habits and be sure to add categories for these expenses.
- Go through your pay stubs and calculate your average monthly gross pay.
- Do the same for any interest income, dividends, bonuses, or other miscellaneous income.
- For each expense category, try to determine a budget amount that realistically reflects your actual expenses while setting targeted spending levels that will enable you to save money.
- Once you're comfortable with your expense categories and budgeted amounts, enter expenditures from your checkbook from the last month.
- Keep track of cash expenditures throughout the month and total and categorize these at the end of each month.
- Subtotal the income and expense categories.
- Subtract the total expenses from the total income to arrive at your net income.
- If the number is negative, your expenses are greater than your income. Your situation can probably be greatly improved by changing your spending habits.
- If you have a positive net income, transfer most of it to a savings or investment account at the end of each month. Extra cash left in a regular checking account has a way of getting spent.
- After you've tracked your actual spending for a month or two, analyze your spending to identify where you can comfortably make cuts.
- Once you've got the budgeting process in place, take an in-depth look at your largest spending categories, brainstorm about ways to reduce spending in specific categories, and set realistic goals
- Update your budget and expenses monthly.
Tips:
- Don't try to fit your expenses into somebody else's budget categories. Tailor the categories to fit your own situation.
- Make your categories detailed enough to provide useful information, but not so detailed that you become bogged down in trivial details.
- Think of your budget as a tool to help you get out of debt and save money, not as a financial diet.
THE ROAD TO FINANCIAL FREEDOM
Glenn Scharf spent nine years at Prudential Securities before realizing that he wanted to create a very different kind of financial institution.
Of his time at Prudential, Scharf says that he learned a great deal about how he did and did not want to do business. He describes the Philadelphia firm as a dynamic working environment, free of pretensions, but came away with the understanding that the large-scale corporate model was not suited to the way he wanted to work, or to the needs of the clients he wanted to work with.
"In large companies it's virtually impossible to put the client first," he explains. Thus Scharf Group LLC was born, a company whose small size and experienced, dedicated staff are organized first and foremost around best serving their clientele.
Anthony Zalesky, a certified financial planner, joined Scharf Group in early 2007 after leaving his job at a company of 600 employees. He noticed the difference immediately. "From offering advice to building portfolios, I'm very pleased with what I've been able to do for my clients here," he says. "The amount of attention and care paid to individual clients is something I had been unfamiliar with coming from the larger companies I'd previously worked for."
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