If you’ve ever created a budget and then failed to stick with it, you’re in good company.

Plenty of people have struggled with budget creation.

This will be true from now until the end of time.

It’s difficult to pre-plan something as complex as finances and expect to stay on target consistently.

One reason people fail when creating budgets is that they have no idea how much they normally spend in a month.

We can take educated guesses, but if we’re off, our entire budget gets thrown. That becomes discouraging, and eventually leads to us abandoning it.

Thankfully, there is a way to get everything in order before you make your budget that will not only make it easier to create, but also help you adhere to it.

All it takes is two steps and one overarching theme.

Step 1: Take Inventory

If you don’t know how much you spend every month, you will struggle to create a realistic budget. In the past it was much easier to remain in touch with monthly spending habits.

We had to write down balances in checkbooks, and we had physical stores of cash that slowly dwindled. Today, though, we deal mostly with virtual currency. That creates a degree of separation between us and our money, which makes it difficult to get a hold of our spending habits.

There are ways to combat this, though, and we can use modern technology to our advantage. If you have a smartphone, the solution is easy.

There are plenty of smartphone apps that make it easy to record your expenses. If you don’t want to spend money on an app — and no frugal person would if there were a reasonable and free alternative — you can just use a notepad app.

If you don’t have a smartphone, no big deal. You can just carry around a small notebook or use these personal finance worksheets. The idea remains the same however you choose to approach it.

Here’s the challenge: For one full month, write down every expenditure you make. If you buy a pack of gum from the convenience store, write it down.

Fueling up? Write it down. No matter how large or small the expense, no matter how expected or unexpected, write it down.

Do this for a full month, and you’ll have a good data set that you can work with.

Writing down your expenditures will accomplish two goals.

First, it will give you a basis for your budget. You’ll actually have hard data on how much money left your hands, so you’ll know what’s reasonable and what’s not.

Second, it will make you think twice about spending. When you buy something, you’ll know that you have to face the notebook.

That expense has to get recorded. It might make you re-think some purchases before you make them.

Step 2: Create The Budget

Only after you have an idea of how much you spend can you start to create your budget. If you’re reading Living Richly On A Budget, chances are you’re familiar with how to create a budget.

But here are just a few pointers that will come in handy when you create yours — the one you stick with.

• Fixed and regular expenses first. There’s no reason to start with groceries or entertainment. Start with recurring expenses, such as mortgage/rent, cable, electricity, and other things you have to pay every month.
• Pay yourself. This is quite an under-looked aspect of budgeting. There is no way to get out of the fixed expenses, so they go first. But after that, it’s important to pay yourself. Maybe you can’t pay yourself much at first, but make sure that you’re siphoning money into a savings account every month. That money will come in handy down the road.
• Overbudget where possible. There are many regular, recurring costs that aren’t quite predictable. Transportation costs, for instance, will vary with the price of fuel and with your frequency of travel. It’s best to overshoot this by a little bit, just to be sure you don’t go over.
• Create an emergency fund. This is tough, especially if your budget is tight. But it’s necessary to create an emergency fund for items you don’t count on your budget (because you can’t foresee them). If necessary, use the funds you’d normally pay yourself to build up an emergency fund, at least at first.

In addition to these tips, another important point is to remember that a budget is a fluid thing. That is, by necessity you will go over some months and fall under some months.

In the cases where you go over, it’s important to not get frustrated. It happens. Just focus on coming in under budget the next month.

If you go over, don’t rush to spend that cash. Put it in the emergency fund.

That way, if you go over the next month you’ll still even out during the two-month period. That gives you a clean slate heading into the third month.

With all of these tips and suggestions in place, we move onto the overarching theme of any budget creation:

Remain Flexible

Planning is great. It gives us a greater degree of control over our lives. Yet at the same time, adhering to a strict plan, without bending, can become counterproductive.

Circumstances change constantly, and we need to be ready for when that happens to us. When you create your budget, keep in mind that it is a living document, and that it might need to change as the month moves along.

Remaining flexible means not being married to the same budget every month. Over time things do change, and you might need money in one area and not in another.

The analogy I like to use is smart grid energy. Power companies use smart grids to deliver power where it’s needed, when it’s needed. To do this, they draw power away from areas that don’t need it at the time.

Your budget should adhere to that principle. If you find that you’re consistently over-budgeting your fuel costs, but your work clothes are starting to look shabby, move some of those fuel funds to clothing.

You can also draw from other funds, at least temporarily, if necessary. It all works on a smart grid, with your budget flowing from one point of need to the next.

For years I struggled to get a hold of my finances. It led to some tight situations and some scary possibilities. It wasn’t until I created a deeper connection with my spending habits that I was able to set a realistic budget — and then stick with it.

Following this two-step method and remembering to always remain flexible has turned around my financial life. I can’t imagine going back to the old ways.

Joe Pawlikowski is the editor of BBGeeks, a site dedicated to helping BlackBerry users get the most out of their devices.

Photo Credit: Casey Serin

Featured in Totally Money Blog Carnival #52.

Home foreclosures are so prevalent nowadays that either you or someone you know is going through this. The American dream is to own a home. But what happens when you can no longer afford to pay your mortgage?

Facing foreclosure, now what? If you’re planning to let go of your home and your credit score is bad, how do you pass a credit check to rent?

It’s not the end of the world. But you do have to take action and make changes in the way you handle your finances in the future. You’ll have to change your mindset in order to survive.

I am not an expert in real estate law so I will refer to an expert, Suze Orman. She offers 5 Ways to Avoid Foreclosure.

Suze Orman’s Tips for Avoiding Foreclosure

1. Refinance - If you have an Adjustable Rate Mortgage try to refinance to a fixed rate mortgage.

2. Call your lender – As soon as you can’t make your mortgage payments, contact your lender to see if they can extend the foreclosure period.

3. Forbearance – If the lender allows you, you might be able to do a forbearance. This is an agreement between you and the lender to delay a foreclosure so that you can catch up with your mortgage payments during a certain period of time.

4. Loan modification – If you’re 30 – 120 days late in payment and have a good credit score and income, then this option may be for you. Call your lender to see if they will modify your loan, give you a lower interest rate, or extend your payment period.

5. Short sale - Suze says this is the last resort. When you owe more on your home than it’s worth, this may be your option. You have to talk to your lender to see if you can do this, which is sell the house for less than you owe them. But you may owe taxes on the difference. Do your own research to see if this applies to you.

Suze’s Orman’s Tips for Renting When Your Credit Score is Poor

Some people fight tooth and nail to keep their home. But sometimes, it’s time to let go and move on. You have to let go of your pride and do what you need to do.

Who cares what anyone else thinks? They’re not paying your mortgage. And there’s nothing wrong with renting.

If you plan to let go of your home, then what? I watched a Suze Orman show about a woman who wasn’t making mortgage payments. She asked if she should resume making payments even though she already missed several months.

Here’s Suze’s advice and strategy. She told the woman to not make anymore mortgage payments since she was so far behind on her payments and she hasn’t paid much of the principal amount.

Instead, she said to save the money she would use towards making mortgage payments to save up for renting an apartment. Since it may a few months to a year for the bank to foreclose on the house, the woman could save up enough for 6-12 months of rent.

Then when she goes apartment hunting and potential landlords look at her less than perfect credit, she could offer to pay 6 months or more of rent up front to make the landlord feel more at ease. Or she may pay a higher security deposit. Interesting strategy, huh?

Here’s similar advice that she offers to a couple who can no longer afford their home.

I can’t tell you exactly what to do in your particular situation. So please don’t take my word for it. These are just ideas to get your started.

Always do your research for yourself and talk to a professional before making such an important financial decision!

By the way, Suze Orman answers questions on Twitter. Pretty awesome!

Recently, there’s been some mud slinging at Suze on Twitter over her new pre-paid debit card. She apologized for her remarks. She’s human after all.

I still think her advice is great. It just shows that she really manages her own Twitter account.

Photo Credit: taberandrew

With 2012 already here, are you thinking of your financial goals and resolutions yet?

Whether your goals are to pay off debt, save for a house, save for retirement, become wealthy, or open a business, you’ll find some of these resources helpful in reaching your goals.

You have probably heard of most of these books and have read them, but it’s nice to re-visit old favorites.

I love reading and every time I finish a book, I gain new insight and inspiration. Inspiration can come from many different sources but books by far have helped me immerse myself in the author’s point of view.

1. The E-myth Revisited: Why Most Small Business Don’t Work and What to Do About It

If you ever had an inkling to start a business, this book is for you. Before I became an entrepreneur, I thought that a lot of businesses made money.

And if you were good at your craft and had a great product, the money would flow in. This is NOT true! I started a videography business, knowing nothing about business, but learned it along the way. Even when people thought I was successful, I really wasn’t making much because of expenses.

This book dispels the Entrepreneur Myth, that if you depend on yourself to do everything, you’ll be successful. The truth is most entrepreneurs work very hard and invest a lot of time money only to lose it all and more. The E-myth will open your mind to a new way of thinking on how to run your business.

2. 9 Steps to Financial Freedom: Practical and Spiritual Steps So You Can Stop Worrying

As you may know, Suze Orman is a straight shooter. This is one of her early books and I found it very helpful for financial guidance.

She outlines how to get your life in order, pay off debt, start saving, etc. I also like how she talks about underlying emotional issues that affect how people deal with money.

3. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy

I read this many years ago, but the points in the book still stick with me. Millionaires are not necessarily the people who drive flashy cars, wear nice clothes, and eat at high end restaurants. In fact, those people may just be in a lot of debt to look like they’re rich.

Real millionaires may go unnoticed. They may even be your neighbors.

4. The Wealth Cure: Putting Money in Its Place

I got to review this book last year. Are you using money or is it using you? It inspired me to reach for my dreams. You can read my review here.

5. Who Moved My Cheese?: An Amazing Way to Deal with in Your Work and in Your Life

You can probably finish this book in half an hour. It’s a short book but has life changing advice.

Change is inevitable. What you do about will shape your future.

Featured in Carnival of Personal Finance – “Ask the Right Questions” Edition.

Budgeting used to be a laborious task. In the old days, it involved saving all of your receipts and writing down the info on a worksheet or entering it onto an Excel sheet or software program.

And if you used a program like Quicken, you had to reconcile everything! What a pain!

I almost gave up on budgeting, until I found Mint.com. If you haven’t tried Mint.com yet, it’s a free online program that tracks your budget automatically.

How does it do this? By tracking your credit card purchases and ATM withdrawals. It puts these purchases into your budget categories.

And it pulls info from your bank accounts and gives you an overview of how much money you really have. It does this by showing the total amount in all of your bank accounts minus your current credit debt.

10 Reasons why I love Mint.com

1. Tracks spending automatically.

This is good news if you’re lazy. Since most of us use credit cards to buy things, Mint tracks credit card purchases, then places them under your budget categories.

You may have to make adjustments to certain purchases since Mint will sometimes put it under the wrong category. But it’s smart enough to memorize recurring transactions, like a cable bill.

2. Gives a snapshot of all bank accounts and debts. 

This is a very important feature that you won’t get from an Excel spreadsheet or budget worksheet. With Mint.com, you’ll know how much money you really have at any given time. It does this by subtracting current debts against the money available in all of your accounts.

3. Provides reminders of upcoming credit card bills that are due.

If you are late in paying bills, you’ll love this feature. Mint.com will automatically send you an update ahead of time about credit card bills that are due.

4. Shows current cash flow in all budget categories.

Are you over, under, or on target with your budgets this month? This feature will let you know your progress.

5. Sends a weekly email, providing an overview of your budgets.

If you’re like me, sometimes you’re too busy to log into Mint.com. That’s why it’s helpful to get a snapshot via email of your weekly progress on goals and your budget.

6. Alerts you if you go over budget.

This is more like a guilt trip, if you ask me. It’s a a good guilt trip, to remind you that you’ve overspent. Eek! We all need a kick in the behind sometimes.

7. Lets you track cash.

Mint has recently started tracking cash through ATM transactions. How clever! So if you’ve withdrawn $60 from the ATM, you can record how you spent that $60.

8. Track your budgets on-the-go on your smartphone.

Being able to see your budget at all times is a must. The Mint app is awesome but it isn’t perfect. Sometimes the app has delayed info in updating your accounts.

9. It’s free!

Why is Mint free and how do they make money? They partner with other businesses to provide you with financial products. You don’t have to purchase or sign up for those products in order to use Mint.

10. It’s secure.

Mint.com is verified by TRUSTe, VeriSign and Hackersafe, and supported by RSA Security. And Mint.com is a ready only service. No one can move any money!

Check out this video to see how to use Mint.com.

Ready to get started? Sign up for your free Mint.com account here.

I found this funny Saturday Night Live skit about how to get out of debt.

And I just had to share it because it’s an amazingly simple concept.

But somehow we make it more complicated.

Steve Martin’s character in this skit totally reflects the mentality of a lot of people.

Sometimes we need silly things like this to remind us to stay on track.

Live within your means and spend less than you make. Don’t spend more than you have.

It’s not rocket science but we tend forget these things when hyped up marketing and things tempt us to swipe that credit card.

Enjoy and share!

Step 1: Monitor Money Spent

Keeping track of how much money is spent during the month and what that money is being spent on is an important first step. Programs such as Microsoft Excel can make this task easier, but if that program is not available, a notepad can also do the job.

Step 2: Wants versus Needs

The next step is to look at all expenditures and ask the question, “Is This a Want or a Need?” Needs are things that we all must have to survive or live a comfortable life, such as electricity, heating, air conditioning, water, transportation, clothes, furniture, etc.

Wants are things that are nice to have, or activities that are fun to do, but not essential for everyday life. Examples of things and activities that would fall into this category are attending sporting events or movies, going out to eat at restaurants, big screen television, iPod and MP3 player, fancy cell phone, cable television, candy bar, etc.

Step 3: Eliminate and Reduce

Once wants and needs have been identified, now it is time to cut out all the wants and cut spending on needs. For example, paying the water bill is a necessity, but find ways to trim the costs. For example, cut off the water when brushing teeth, take short showers, water the yard only once or twice a week, etc.

Some type of transportation is necessary, but that transportation does not necessarily have to be a vehicle. If possible, try walking, biking or riding the public bus to reach destinations. If some type of vehicle is necessary, avoid expensive vehicles and aim for ones with high gas mileage.

Also, use as many coupons at the grocery store as possible to reduce costs, and buy things in bulk so fewer trips to the grocery store will be necessary. Another tip is to buy value brands instead of the more expensive brands. Lastly, prescription medications are a necessity for many people, but aim for the generic brands.

Step 4: Add and Adjust

At the end of each month, make sure to add the monthly expenses and compare it to monthly income after taxes. If the amount of money left over is satisfactory, this monthly spending pattern should be continued. If not, make adjustments for next month by looking for additional wants that can be eliminated and looking for more ways to save money on needs.

This guest post was contributed by Kelly Austin from Higher Salary. Visit her site for information on the average medical transcriptionist salary and guides to other popular careers.

Photo Credit: uberculture

Creating a business is one thing, but keeping it is another. Most may view budgeting as a tedious task but it actually plays a big role in keeping a business (of any size) running. Many freelance business owners do not keep accurate tabs of the money, which can mean huge losses down the road. Yes, budgeting takes time and effort but it is the simplest way to save money.

Be realistic about budget expectations.

When starting a freelance business it is critical to understand both your weekly and monthly budget. As workflow increases it is easy to lose sight of the bigger picture; budgets keep businesses on track and should be monitored carefully.

How much do you spend (realistically) on office supplies on a weekly, monthly, even yearly basis? How much does rent, electricity and internet cost you each month? Take a snapshot of all your monthly expenses; make sure to include every single cost when creating a budget. Although $10 for lunch daily may not seem like much, that’s $50 a week that could be allotted elsewhere.

As you write out expenses (big and small) a clearer picture will begin to form: You may notice areas that need more monetary attention and others that seem to have unlimited spending ability. This is also a great opportunity to re-order your priorities.

Key things to remember:

• There are a plethora of websites to help you manage a budget (many of them are free).
• Update your budget daily.
• No detail is trivial: list every expense.
• Make sure to include some “wiggle room” in your business budget for unforeseen challenges. Clients make changes, computer systems crash, and new technologies (like email marketing software) emerge. Padding your budget makes it easier to bounce back from setbacks.
• Once your budget it set, don’t touch it!

You’ve reviewed your expenses and worked out a livable budget for your freelance business. Now comes the tricky part: sticking to it! Although it is tempting to overspend here and cut back there, not adhering to a budget will cost you more in the long run.

At this point, a budget becomes more than a money management tool: it becomes a lifestyle change. If you are willing to cut corners with your budget, what other corners are you cutting in your business?

Some revision is expected but your budget should remain stable for the entire year.

Key things to remember:

• A surplus at the end of the year means an office shopping spree!
• Keeping track of all purchases is helpful come tax time.
• Cash-flow issues are the number one reason freelance businesses fail.

Many small businesses fail within their first year because they don’t stick to a budget. Be realistic about how much you can afford to spend and change your habits accordingly.

Identify your business needs (which should include everything from marketing to office supplies) and then reorder your list according to importance. Make sure to set weekly, monthly, and yearly goals for your business and reward yourself accordingly for meeting your goals.

This guest post was written by Leah B, who is a contributor to the Eat Breathe Blog.

Photo Credit: Senior Living

Featured in the Totally Money Blog Carnival Celebrity Roast Edition hosted by Financial Success for Young Adults.

I was sent a copy of The Wealth Cure: Putting Money in Its Place by Hill Harper to review. It’s a captivating and charming book that will uplift you to make changes in your life.

If you don’t know, Hill Harper is an actor, most known for his work on CSI: NY, and he is a New York Times best selling author of several books. After a blindsiding thyroid cancer diagnosis, he was forced to figure out what really mattered in his life. He had money, homes, cars, but that didn’t matter anymore.

Right before his impending surgery, he takes a 3 day, cross country train ride from LA to Chicago to sort out his thoughts. Along the way, he meets some interesting people who inspire him in his journey to finding his wealth cure.

Hill Harper weaves stories of himself and his friends and their journeys to finding wealth. However, the wealth he describes about in The Wealth Cure is not about money, but about finding “unreasonable happiness”. How fitting that this book is about the same subject matter as Living Richly on a Budget!

In this blog, I talk about “living richly” in terms of finding true happiness, which doesn’t come from having lots of money. Not that having a lot of money is wrong or that you won’t be happy if you are wealthy. But true happiness starts inside. If you are not truly happy inside, then you won’t be happy no matter how much more money you have.

Hill Harper explains that in order to create a Wealth Cure, you must examine your Wealth Factors, what “provides us with a deep, enduring sense of well-being.”

And you have to change the way you think about money.

• Are you using money or is it using you?
• What’s in your “Life Account” vs. your “Bank Account”
• Understand and respect the power of money, but not let it control your life or happiness
• Invest in yourself first
• Consider the value of life insurance, a will, and an emergency fund
• Know the difference between “smart money” and “dumb money”
• Become an active architect in your own life

While reading this book, I reflected on my relationship with money and what true wealth means to me. The stories and quotes in the book touched me so much that at times I had to put it down to immerse myself in its wisdom.

The Wealth Cure is surprisingly heartwarming and inspirational. It will invigorate you to live out your dreams and find true wealth.

 Featured in The Carnival of Wealth, Fall into Fall Edition hosted by Control You Cash.

It’s important to live on a budget and not overspend these days. The best way to do this is to use a personal budget worksheet that you refer to every month.

Putting together a personal budget is not hard. It’s staying within your budget that’s challenging.

The goal is to spend less than you make. And hopefully, you have a little leftover for savings and other financial goals.

The key is to know how much you make, how much you spend, and how much you owe. Recording this info onto a personal budget worksheet gives you a good picture of your financial position.

3 Personal Budget Worksheets

1. Excel Budget Worksheet - You can customize this budget template to fit your needs and it has the Excel formulas built in to make automatic calculations. I also like that you can see entire year.
2. Web-Based Budget Worksheet - With this budget worksheet, you can add your numbers and add or remove categories right from this webpage. It also shows your planned budget vs. actual spending and the difference.
3. Personal Monthly Worksheet - This worksheet shows a running total of your income subtracted by expenses.

Mint.com - Web-based budgeting software

In the beginning, I created my personal budget using a worksheet. Now I use Mint.com to track my budget. It’s easy, automated, and free!

You can download the iPhone/iPad app and have access to your budget on-the-go. They also finally developed a way to track cash, using recent ATM transactions as a guide.

One caveat to Mint is that you have to enter the login info for your bank accounts and credit cards. But they have a good reputation for keeping your info safe. See my Mint review.

Once you have a budget worksheet filled out, you can refer to it month to month to see where to make adjustments, if needed. A budget worksheet isn’t set in stone. Chances are, you’ll be like most people who will have to make changes to their budget.

As your life changes – you go to college, move out on your own, get married, have kids, retire, so will your budget.

Let’s explore the things that will go into your budget worksheet, starting with income. Think of all the ways you earn money.

Sources of Income

• Salary
• Bonus
• Commissions
• Sales
• Freelance Work
• Blogging Income
• Child Support
• Rental Property Income
• Interest Income
• Social Security
• Pension
• eBay income

Pre-Tax Budget Items

• Retirement plan contributions (eg. 401K)
• Health insurance premiums (Medical, Dental, Vision)
• Contributions to HSA or FSA
• Employee stock purchase plan
• Union dues and other job-related expenses
• Child support
• Disability Insurance

If you ever tune into one of the 24/7 news channels, it’s all doom and gloom these days. The stock market is a complete roller coaster ride and the U.S. debt problems are on the lips of every pundit. Every person has a different opinion as to how to fix our problems and it can be really stressful to watch. So I suggest you turn off the TV, and instead do the things that you actually have control over. In other words, work on managing your personal economy.

1. Contribute to your Retirement. – Don’t count on the government being able to fund your retirement. You have to take personal responsibility for your future. The younger you are, the longer you have until you retire. So go ahead and put off retirement savings for another day, right? Wrong. Flip this one on it’s ear and take the approach that the younger you are the more compounded interest your retirement fund will be able to take advantage of. So start putting any amount of money into a 401k or Roth IRA. It could be $10 a month, it could be $100 a month, whatever you can afford, just start! Ten years from now you will thank me.

2. Build an Emergency Fund. – There is nothing more stressful than not having enough money to cover life’s unexpected problems. An example would be hearing a strange noise coming from your car’s engine and hoping it doesn’t break down because you know you can’t afford to fix it. I have personally been there and I know how stressful it can be. So this is why I suggest building up an emergency bank account fund with at least 3 months of income in it. I know this can be really hard if you also have debt you are trying to pay off, but if you can put aside $100 a month toward an emergency fund it can be done. This may mean cancelling or downgrading services like cable TV, or your cell phone plan, but the peace of mind that comes with an emergency fund makes it all worth it.

3. Don’t Be Afraid of the Stock Market. – If you are in your 20′s, 30′s, or even your 40′s, you have time on your side. The latest market correction will be nothing more than a small bump in the road over the course of time. So do not panic and take yourself out of the game. Stay the course and ride through this bumpy time. This is so important because if you take yourself out of the stock market the day after the DOW goes down 400 points, you are going to miss out on the day when it goes up 350. Stay the course.

4. Focus on your Debt. – Just because the United States consistently spends more then they bring in, it doesn’t mean you have to follow their lead. If you carry any credit card debt make a pact with yourself to focus on paying it down. Stop using your cards and carry cash. This is a great psychological money management tip. If you see the cash leaving your pocketbook you will be less likely to impulse shop.

When it come to paying off your credit cards, start with the card with the highest interest rate and put every extra dollar into paying off the balance. Look at this way, if your card carries a 18% interest rate, you are literally saving 18% of every dollar you put toward your card balance.

What tips would you add to my list? Perhaps managing your personal economy by shopping smarter, and a big part of that is using coupons when available. Here is a list of current offers that can hopefully save you some money. Thanks again Fanny for letting me contribute to your terrific blog.

About The Author: Kyle James owns and operate a website called Rather-Be-Shopping.com which specializes in coupon codes for over 700 stores, organized in 25 shopping categories. He also has a blog, where he writes about frugal living tips, creative ways to save money, and other musings about the adventures and mis-adventures of raising 3 active kids.

Photo Credit: bransorem