How To Create a Budget and How It Can Help!
Creating a budget can help you feel more in control of your finances and let you save money for your goals. The trick is to figure out a way to track your finances that work for you. Everyone is different, with different income levels and expenses: so make decisions that you feel comfortable with.
Determine Your Net Income
Record all of your sources of income
Calculate and Track Your Spending
Gather every financial statement you can
Create a list of monthly expenses and find out your percentages breakdown in the following categories.
Needs: Items like your rent or mortgage, utilities, home and auto insurance. These are expenses you can't forgo without a major issue.
Wants: What is left over after “Needs” and “Savings” is “Wants.” This your quality of life spending like your cell phone data, date night, eating out or new clothes.
Savings: After needs, saving and investing is important to add to your future every month.
Break expenses into two categories: fixed and variable
Example of Fixed: Rent (the same every month)
Example of Variable: Food & Entertainment (can fluctuate)
Set Savings and Debt Payoff Goals
Make a list of all the financial goals you want to accomplish in the short-and long-term.
Short-term goals should take no longer than a year to achieve.
Long-term goals are saving for retirement or your child’s education, may take years to reach.
Some experts suggest putting 5% of your income toward paying off debt.
Record Spending and Track Progress
Total your monthly income, monthly expenses and see how they change each month
Categorize your spending in categories such as Food, Gas, Entertainment, etc. in order to see where you’re spending the most money
Adjust Your Habits If Necessary, Keep Checking In and Be Realistic
Make adjustments to expenses based on your income
Sometimes that means going out less or meal prepping to save money on additional eating out expenses
It can take time to make your budget start working so having patience is necessary. As you get better at budgeting, it is important to keep your spending, bills, and savings goals in balance.