When planning for a better financial future, try establishing and executing a monthly budget plan by following these few steps.
It’s important to know what’s happening with your money. When you create a budget, you’ll be able to track where your money is going. By following these three simple steps, you’ll be able to easily create and continue using a monthly budget plan.
These steps really are easy as 1, 2, 3.
The first thing to note is there are different budgeting tools. Some people will feel more comfortable using paper. Others will prefer electronics. Just choose what’s going to work best for you.
Step One: Determine Your Income
Before you think about spending money, you should know how much money you make.
Gather your paychecks and bank statements to determine where the money is coming in. Calculate your income by adding all of these together.
If you have a salaried job, this step will be easy. For those who work hourly or don’t have a set income, there are a few things you can do to find an average. One way is to average the last six months of pay. Another is to just take the lowest month just to be safe. Either way, you’ll have an idea of your income.
Make sure to note this number and keep it handy. It’s vital in creating your monthly budget.
During this step, it’s also beneficial to know how much money is in your savings, checking accounts, and investments. When you’re accountable for your money, you’ll be able to keep up with the budget.
Step Two: Calculate Your Expenses
After you’ve determined your income, list all of your expenses.
This will include mortgage/rent, utility bills, loans, and any other recurring debt. Pretty much, list everything and the amount that you have to pay out every month. Again, with some utilities, create a seasonal average just to plan the budget ahead.
Keep this number handy too.
Now, list any other expenses that vary throughout the month. This will include groceries, gas, fun activities, and savings. Again, save this number.
With these two lists, you can see the amount you’re spending, on average, each month.
Step Three: Take Charge
At this point, you can see if your spending is doable for your income. To do this, simply take your income and subtract it from your expenses. If your number is positive, you’re making more than you spend. If it’s negative, you’re spending more.
Here, you can take charge of your finances.
After looking at what you’re spending your money on, figure out what you can do to save money. Block out amounts for each expense and stick to that budget.
With any leftover money, you can open a savings account or start paying off extra debt.
Throughout the month, track your spending. With everything you buy, keep the receipt and write it down. This way you can see what’s going on with your money.
Take charge of your monthly budget and make executing it enjoyable to help your financial future.
Check next week’s Financial Tip Friday to see how to pay off annoying debt.