How to Budget


To begin building your budget, you will need to know how much money you have coming in and how much money you have going out. Then, follow these simple personal budgeting steps and you'll be on your way to financial success.


1. Start with your income. List every source of income to determine what your monthly total is. Use your actual take-home pay, which is the amount on your check after taxes and other expenses like health insurance have been deducted. If you have income from other sources, such as alimony or child support, and they are steady and reliable, you may choose to list them as well. Add up all of your income sources and write down your total monthly income.


2. List your fixed expenses. Your fixed expenses are those that do not change each month. Your car payment, mortgage or rent, gas and electric, daycare, and monthly credit card payments are examples. And don't forget to put ten percent of your income toward this category: You. Paying yourself is important and an excellent way to grow your savings. 


3. Subtract your total fixed expenses from your total income.  The amount you have left can be used to cover your monthly variable expenses including groceries, dining out, clothes, gifts, and other entertainment. These line items can be adjusted each month, after you see how much is left from paying your fixed expenses.


4. Compare the money coming in to what is going out. Surprised? Most people are. Have money left? Increase the percentage that you save. Instead of ten percent, increase it to 15% or more. You'll be glad to have a healthy savings account to dip into for unexpected expenses or to enjoy a special occasion.


5. Keep track of all your income and expenses. This can be done with simple pen and paper, or may be easier using budgeting software. Find what works for you - then use it. Just be certain to record all of your expenses. Keeping track of where every penny goes will yield the best results. 

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