When you think of a budget most people think it is a strict way that will lead to saving money. It is defined by the dictionary as an estimate of your income compared to the amount of expenses you may have. All companies whether big or small have budgets and every household should have a budget as well. People who are living paycheck to paycheck every month should probably have a budget created to help them manage their money a little better. Here are some easy steps to follow that will help you to create a budget that you can live with.
Make A List Of All Income And Expenses
The first thing you will want to do when you set out to make your budget is to figure out your monthly income and your monthly living expenses. When you are figuring out the amount of your income you should include your employment salary as well as any other fixed income that you receive every month. You should do the same thing with your expenses. If you spend money on it you should include it. Examples of these are coffee money, car payment, loans, credit cards, utility bills, groceries as well as anything else that you can think of. If you miss something you can add it later. This is the best way to figure out how much money you have coming in compared to the amount of money you have going out.
Figure Out A Savings Plan
A general rule is to save at least ten percent of your net income. If your financial goal is more and you can afford it then you can plan on saving more. What this means is that for every ten dollars you have coming in you should plan to put a dollar into a savings account. If you are faithful and follow the regimen you will see that you savings will grow quickly. Savings can come in handy if you have an emergency that you need cash for. You will be able to use this cash instead of putting the expense on a credit card.
Figure Out Your Goals And Adjust Your Budget To Meet Them
It is good to have your budget down on a piece of paper. This way you will be able to see with your own eyes where you money is going and if you need to make any adjustments you will be able to. This will help you to meet your financial goals. An example of this is if you want to start paying down the amount of debt you have. You can see where you can cut back and put that money towards your debt.
Give Yourself Some Wiggle Room In The Budget
When you make your budget you should not take away all of your happiness and fun. A budget will give you a good idea of what you can afford to do and what you cannot afford. If you want to take a vacation or if you want to go shopping you can start a savings account. When you have the money saved up then you can take the vacation or go on the shopping spree.
Having a budget will take some consistency on your part. You should be sure that you stay within your budget. If you find that it is not working well for you it is possible that you need to change the budget. A solid budget will help you get your bills paid on time while at the same time you can be saving some money. It will require you to have a little bit of discipline but it will be well worth it in the end.
Image credits to Chris Potter